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Driven newsletter archive

Issue 3. October 13, 2019

Is winter coming to SaaS? | How not to hire the wrong sales leader | Sales coaching blind spots | Compare yourself to your SaaS peers | Resources

John, 

October is planning time for companies whose fiscal year is the calendar year. So this email aims to help you look ahead to next year.

Even if your fiscal year ends April 30 (Infor and Oracle, I’m lookin’ at you), you’ll find ideas here to help your business now.

The topics this week lean toward sales and selling. Here’s the lineup:

  1. How not to hire the wrong sales leader: 9 ways to avoid painful mistakes
  2. How your business will benefit from better (or any!) sales coaching. And 10 ways to provide it.
  3. When winter comes to SaaS World, how will your company fare?
  4. Microtakes

Total reading time if you snarf every word: about 6 minutes. If you skim and scan (and I know that’s what you do) it’ll go even faster.

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SALES | ADMINISTRATION | MANAGEMENT | HIRING & STAFFING

How not to hire the wrong sales leader: 7 ways to avoid painful mistakes

Hiring the wrong sales leader is painful, and it happens all the time. As many as 70% of VPs of sales don’t make it through their first year in a SaaS company.

That estimate comes from Jason Lemkin, founder of SaaStr and co-founder of EchoSign. He cites his own his informal study of about 80 SaaS companies in 2014.

The damage from such misfires can be huge, especially for small companies.

How you pay for hiring errors

The potential harm includes missed revenue, wasted compensation, damage to relationships with accounts, lost momentum, flagging morale, loss of shareholder equity, poor cash flow… and many more categories.

Out-of-pocket costs of hiring the wrong sales leader can range from $350,000 to much more.

What you can do to help

So how can you avoid making this common mistake? Here are 7 ideas that will help:

1. Ask yourself if you need a VP sales.

Maybe you can hire the right person without giving them such a big title.

Set objective criteria that would earn them a promotion later.

2. Consider your company’s current stage of growth.

A startup’s sales needs are night-and-day different from those of a company that’s ready to scale.

Hire someone with experience in taking a SaaS company from your current stage through your next stage of growth.

It’s risky to hire a sales leader from a big company to run sales in a much smaller one.

3. Don’t expect even the right new hire to last long.

Few sales leaders have the skills and experience to take a company through multiple stages of growth. Count on replacing yours as you grow.

4. Beware of sales rock stars.

Be skeptical of people who claim to have “been there and done that.”

Despite what they may suggest, they weren’t personally responsible for everything their company achieved while they were there.

5. Be clear about what you expect your new sales leader to achieve. 

If they accomplish only three goals in their first year, what must those be?

6. Consider what skills and capabilities you expect your new leader to have.

Must they get deals closed? Or build a well-run sales operation? Many sales leaders are good at one or the other, but few excel at both.

Kevin Bock, president and founder at J2K Technology, suggests you pay close attention to how they talk about their accomplishments.

Do they focus mainly on how they managed operations and systems? Or on building value and closing deals?

7. Put your new hire on a short-term performance plan.

Establish early success indicators short of achieving quota. Here are some examples:

  • Conduct weekly one-on-one coaching sessions with each sales rep.
  • Review the top 10 deals every 2 weeks.
  • Spend 6 days in the field with reps every month.

If your new hire hasn’t achieved these indicators in the first 60 days, cut your losses and let them go. You may still have time to salvage your revenue goals for the year.

Dig deeper

The Ultimate Guide to Hiring a Great VP of Sales. Jason Lemkin. SaaStr. 2019. 46 pages. [Downloadable PDF ebook.]

Did You Hire the Wrong Sales Leader? No author listed. Sales Benchmark Index. April 3, 2015. Blog post. Read this for more about setting a 60-day performance plan. 

Here’s How to Hire a VP of Sales That Will Last Longer than 19 Months.” Amy Volas. Sales Hacker blog. April 12, 2018. 

How to Hire Your VP Sales.” Jason Lemkin. YouTube video on Sales Hacker channel. March 30, 2014. Length: 32:33. 

The Perils and Pitfalls of the ‘Been There, Done That’ VP: Posers and Mercenaries.” Jason Lemkin. SaaStr blog. November 27, 2012. 

“5 Unforeseen Financial Pitfalls of Making the Wrong Sales Hire. Amy Volas. Sales Hacker blog. June 6, 2017. 

The 48 Types of VP Sales. Make Deadly Sure You Hire the Right One.” Jason Lemkin. SaaStr blog. April 2, 2013. 

Why Hiring Mistakes in Sales Are Even More Costly Than You Think.” Daniel Weinfurter. LinkedIn Sales Blog. January 16, 2019.

 

SALES | MANAGEMENT | COACHING | LEADERSHIP | PRODUCTIVITY

Your business will grow faster with better (or any) sales coaching. Here are 4 ways to provide it.

Virtually every recent study you read about sales effectiveness points to the very high return on investment companies can achieve through sales coaching.

Yet salespeople say they aren’t getting the quality of coaching they need.

And sales leaders say they don’t have the time, training, or experience to provide better coaching.

What sales coaching can do for your company

Here’s the business case for sales coaching:

  • It can improve sales performance by huge amounts.

Some studies suggest about 20%. Others claim as high as 27%.

That means reps close more forecasted deals and with higher revenue. A higher proportion of reps achieve their quota.

Sales managers have few other ways to move the performance needle as much.

  • You reduce turnover of sales reps.

Hiring, onboarding, is expensive and time consuming. It takes six to nine months to make a new enterprise sales rep productive. By reducing turnover can be a huge contributor to sales productivity and reduction of selling costs.

  • You can achieve these results without making big investments.

It’s mainly a matter of management focus and time.

How to do it better

What can you do to improve the quality of sales coaching your company offers?

Here are 4 suggestions:

  • Make coaching a requirement of your sales leaders..
  • Train your sales leaders to be effective sales coaches.
  • Track coaching progress in monthly review sessions with first-line sales leaders.
  • Implement technologies that can make coaching more efficient and effective.

If you think, “We’re already doing this,” take a closer look. You could improve your results by exploring ways to do it better.

The rewards are big enough to be worth the effort.

Dig deeper

Fifth Annual Sales Enablement Study 2019. CSO Insights. 2019. Downloadable PDF. 51 pages. See Chapter 7, Sales Coaching, pages 34-38.

Coaching Salespeople Into Sales Champions: A Tactical Playbook for Managers and Executives. Keith Rosen. 32009. Kindle, audio, hardcover, CD. 353 pages in print edition. 127 ratings on Amazon. Average rating: 4.6 out of 5 points. This is a good book overall. Especially see the Appendix for a list of questions to ask during coaching sessions.

The Sales Acceleration Formula: Using Data, Technology, and Inbound Selling to Go from 0 to $100 Million. Mark Roberge. 2015. Kindle. Audio. Hardcover. MP3. 4.6 stars out of 5. 170 reviews on Amazon. Recommended chapters:

  • Setting up a Predictable Sales Training Program
  • Manufacturing Helpful Salespeople Your Buyers Trust
  • Metrics-Driven Sales Coaching,

The Top 25 Reasons Why Great Salespeople Are Leaving Your Company.” Jennifer McFarlane. Peak Sales Recruiting blog. April 5, 2016. One reason the author cites for high sales turnover is a lack of effective coaching and career development.

The Five Roles of High-Performing Sales Coaches: How the Best Sales Coaches Transform Sales Performance and Maximize Success. Mike Shultz. John Doerr. RAIN Group. Undated. [16-page white paper, downloadable PDF. No charge.]

SAAS | REVENUE | TRENDS | MANAGEMENT | STRATEGY | ADMINISTRATION

When winter comes to SaaS, how will your company fare? 5 things to do now.

“Winter is coming.” That’s the ominous warning some characters repeated throughout 8 seasons of “Game of Thrones,” HBO’s popular TV drama series.

It was a caution for residents of the northern region to be vigilant for an inevitable change of season.

Similarly, the news media today warn of a possible economic slowdown, or even a recession.

A downturn may or may not arrive in the near term. But come it will.

What might it mean to the SaaS industry? And to your company? We explore some possibilities here. And we share 5 tips for what you can do now.

Capital markets dip

Market signals suggest a change of season. It may be mild, but it’s on its way.

Stocks for SaaS companies took a beating in public equity markets in September. RBC Capital Markets covers 21 SaaS stocks. Their portfolio includes Adobe, Salesforce, Dropbox, Microsoft, Oracle, Zoom, and other high-growth SaaS companies.

RBC’s analysts noted that the average return on these stocks was down almost 6% in September, while the S&P 500 rose 1.7%. Further, RBC says SaaS companies could shed another 25% this year.

What’s driving this?

When SaaS customers see a downturn coming, their chief information officers reign in spending. They’re less likely to invest in new technology.

What the Great Recession felt like to one SaaS founder

Even the most sober analysts predict a downturn much milder than the Great Recession of 2008-09.

Jason Lemkin co-founder of EchoSign and founder of SaaStr, remembers how his SaaS company performed then. Here’s what he saw:

  • Many SMB customers canceled their renewals because they were strapped for cash.
  • Most enterprise customers renewed because they had to keep doing business. Some tried to renegotiate their pricing.
  • Revenue from upsells slowed.
  • EchoSign still closed new business, but less than before.
  • Once the market came back, EchoSign and many other SaaS companies scrambled to hire enough sales reps. They still doubled their revenue in 2009.

If you’re concerned, do this now

Lemkin’s advice for companies to reduce the effect of a downturn:

  • In a deep recession, capital dries up. If your burn rate is high, bring it down.
  • Don’t worry about hiring more people in customer success and sales.
  • Build a revenue model that assumes your churn for SMB customers may double. See what that does to your cash flow.
  • If you have over 24 months of runway, don’t worry. Cloud applications are likely to recover within that time.
  • Springtime will come again. Cloud momentum is unstoppable. More and more of the $1 trillion spent on IT will continue moving to the Cloud. Almost no matter what.

Dig deeper

Software Stocks Got Whacked in September. Here’s Why RBC Says They Could Tumble Another 25% Before Bottoming Out.” Daniel Strauss. Markets Insider. October 1, 2019.

Slack Stock Hits Its Lowest Close, Down 37% Since Debut.” Mike Sonnenberg. MarketRealist blog. September 24, 2019.

What The Downturn Will Probably Look Like in SaaS.” Jason Lemkin. SaaStr blog. September 21, 2019.

From Peak SaaS to Post SaaS. Paul Silver. Medium blog. November 20, 2018. [Registration may be required.]

“Where Are We In the SaaS Valuation Cycle? Tomasz Tonguz on his blog. March 18, 2018.

MICROTAKES | RESOURCES

Compare your company’s performance to that of your SaaS peers

Plug in your data to see how your company compares against benchmarks for other expansion-stage SaaS companies.

New source of relevant content for revenue leaders

Alexander Group, a consulting firm that helps companies grow, has launched a new website for revenue leaders.

Growth Marketing Conference in San Francisco, December 10-11

This year’s conference offers a solid lineup of 67 speakers. Get more information here.

Downloadable spreadsheet of 2019’s Top 100 venture capitalists

CB Insights offers a list of the 100 leading VCs. Get your copy here at no charge.

WRAP UP

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Have a great week! 

​​Dave Vranicar 

ABOUT DRIVEN

Driven is a free weekly email for time-strapped revenue leaders in business-to-business SaaS companies.

Its goal is to keep you informed about a broad range of topics related to revenue growth.

We scan the horizon for insights and ideas from sources you may otherwise miss.

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