Decoding the Common Missteps in SaaS: Understanding the Vital Role of a VP/Head of Sales
In the realm of SaaS, there's a prevailing misfire that takes the top spot— the VP/Head of Sales. Despite my initial aversion, there's a VC adage that rings true: "You've Got to Get Past the Carcass of Your First VP of Sales" or "It's The Second VP of Sales When You Really Start Selling," or various similar versions. It used to irk me because I firmly believe in the strategy of Zero Voluntary Attrition, opting for a smaller, more dedicated team instead of a larger pool of transient mercenaries.
However, it turns out that the VCs are largely correct. In SaaS startups, a significant portion of first-time VP Sales appointments fail, often within a year. Their failures can have severe repercussions, surpassing even those caused by a subpar VP of Marketing. A faulty VP Sales hire can undermine momentum and sow internal confusion, significantly hampering progress from Initial Traction to Initial Scale.
If you find yourself grappling with this predicament, I want to provide assistance. It will require a multi-step approach. Firstly, in this post, I aim to elucidate the actual responsibilities of a VP of Sales in a SaaS company. This, in my opinion, addresses 50% of the problem—founder/CEOs often have misguided expectations of their VP Sales. In a subsequent post, I will delve into the selection process, guiding you on whom to hire and how to do it. Additionally, I'll provide you with a script to aid in making the right hiring decision.
Before we proceed, however, let's outline the top five crucial aspects that a great VP of Sales genuinely excels at in a SaaS company, spanning from $500k in ARR to $20m+ ARR, ranked in order of significance.
1. Recruiting
Drawing Inspiration from Nick Saban: Allocating 20%+ of Their Time to Building a Winning Sales Team.
Similar to the legendary coach Nick Saban, successful VP of Sales dedicate a significant portion of their time, exceeding 20%, to a critical task: building a formidable sales team. Recruiting exceptional sales representatives and enabling their success stands as the most pivotal responsibility that your VP Sales will undertake. Seasoned VPs of Sales are well aware of this fact. They either possess a pool of talented reps ready to join the team or are constantly searching for the next 2-3 outstanding individuals. They comprehend that sales operates on the foundation of generating leads but ultimately relies on a robust headcount to close deals. Without an adequate number of capable salespeople, it becomes mathematically implausible to achieve the desired results.
2. Backfilling and Helping His/Her Sales Team
Empowering the Sales Team to Seal Deals: Collaborating and Closing Crucial Opportunities Together
An exceptional VP of Sales not only guides their sales team but actively participates in closing significant deals alongside them. They possess the astute ability to identify and address potential issues before they escalate. Moreover, they possess a forward-thinking mindset that enables them to spot opportunities on the horizon. Overall, their primary objective is to ensure optimal efficiency and effectiveness within their team, whether they oversee three reports, ten reports, or even thirty direct and indirect reports.
3. Sales Tactics
Gaining a Competitive Edge: Strategies for Success
To stay ahead in the market, it is crucial to master several key aspects. This includes crafting compelling pitch scripts, coordinating strategies to address and counter FUD (fear, uncertainty, and doubt), effectively segmenting customers, optimizing collaboration with Demand Generation and marketing teams, and collaborating with Product and Engineering to address feature gaps. Ultimately, the objective is to learn and comprehend how to maximize revenue per lead, thereby ensuring optimal revenue generation and business growth.
4. Sales Strategy
Strategic Expansion and Resource Allocation: Charting the Path to Success
As your company aims to determine the ideal markets for expansion, strengthen its existing customer base, and allocate resources effectively, strategic decision-making takes precedence. Once your Annual Recurring Revenue (ARR) surpasses the $20 million mark, strategy assumes a greater role, moving higher up the priority list. This transition occurs when the VP of Sales has established a capable team of lieutenants or managers, such as Directors of Sales, who can consistently execute core tactics. By striking the right balance between strategy and tactics, your organization can navigate the path to sustained growth and success.
5. Creating and Selling Deals Themselves
This is the last of the Top 5. Important, yes. But #5 on the list 5 most important things your VP Sales should be doing. And this is perhaps the unobvious part.
It’s #5 I think that is the root of half of the problems hiring your VP Sales. Up until you make this hire … you the founder have likely been the acting VP Sales yourself, hopefully with 1-2 reps to help you (ideally two). And you want to accelerate, do better … so you want to hire a VP Sales to … sell better than you.
Makes sense. Except it doesn’t — because believe it or not, even at just $1-$2m in ARR, you’re already getting too big for VP Sales to be spending most of his time selling himself. Let’s say you hire your VP, Sales when you are at $1m in ARR. And you want to get to $2m in ARR in the next X months. OK, adding in churn, you’re going to have to add another >$1m+ ARR … quickly. To do that, you’re probably going to need at least 3 scaled-up reps working 100% to hit quotas of say $300k-$400k each (you can raise these later, but it’s hard early). And to do that, if your ACV is, say, $5k … you’re gonna need to close 200 deals in the next 12 months. 200 deals.
And then … as soon as you hit that run rate (which actually should happen earlier than month 12, because you have to hit the velocity earlier than that to hit the full year-end goal) … you’re gonna need 6 more reps to hit the next goal. All of a sudden, that’s 10 reps. Before you know it. And 400-500 deals a year.
So yes, your VP Sales should be out there closing the big ones, the huge deals, on a plane, on a jet, of course. Sometimes, soup to nuts, lead to close. And it’s great when they even take a quota at first, to do it themselves. But there’s no frackin’ way he/she can do more than a handful of all your deals directly, him/herself. The deal volume to hit your growth targets is just too high.
So my uber-point here is you shouldn’t hire a VP Sales until you are ready to scale and build and fund a small, growing sales team. And any VP of Sales that doesn’t see this — probably isn’t a great VP of Sales for you. Instead, he/she is either just a great individual contributor, a great figure-it-outer … or a deeply flawed candidate. Either way, not a great VP Sales.
Your VP Sales cannot rescue you from “Great Product. No Revenues”. Your VP Sales cannot rescue you from having no organic demand for your product.
>> But a Great VP Sales can take that tiny bit of Initial Traction, that small little trickle of inbound lead flow … those raw materials … and do something really magical with them. Drive your revenue per lead way up, and put you in place to jump on and close every practical piece of business that comes through the door. Create a real machine to monetize the prospects and leads that find their way to you. And then add some gravy in outbound and other expansion on top of that.
That’s the magic in a great SaaS VP Sales.
10 Great Questions to Ask a VP Sales During an Interview
Ready to hire your first VP Sales? But haven’t done it before?
Let me give you a partial interview script that may help a bit. You’ll have to vary it for different types of SaaS businesses — a bit. But it will basically work for all SaaS companies from, say, $200k in ARR to $10m in ARR or so — a wide range. (After that, you’ll probably be looking for a different type of VP Sales. We’ll get there in our next and final VP Sales post.)
Before we get there, as a reminder, I strongly recommend you hire 1-2 sales reps (ideally 2) before you hire a VP Sales, at a minimum. And make them successful first. So you can practice what you preach, and know of what you are hiring. And also to get big enough so a VP Sales can actually help, not hinder you. More here in our prior VP Sales post: When You Hire Your First Sales Rep — Just Make Sure You Hire Two
Now if you are ready, but haven’t done it before in SaaS, here are 10 good screening questions to see if you have a real VP, Sales candidate in hand — or not. These questions mostly don’t have right or wrong answers, but will help you determine the quality and fit of the candidates:
1. How big a team do you think we need right now, given what you know?
If he/she can’t answer — right or wrong — pass.
2. What deal sizes have you sold to, on average and range?
If it’s not a similar fit to you, pass. If he/she can’t answer fluidly, pass.
3. Tell me about the teams you’ve directly managed, and how you built them.
If he/she can’t describe how they built a team — pass.
4. What sales tools have you used and what works for you? What hasn’t worked well?
If they don’t understand sales tools, they aren’t a real VP Sales.
5. Who do you know right now that would join you on our sales team?
All good candidates should have a few in mind. Tell me about them, by background if not name.
6. How should sales and client success/management work together?
This will ferret out how well he/she understands the true customer lifecycle.
7. Tell me about the deals you’ve lost to competitors.
What’s going to be key in our space about winning vs. competitors?
8. How do you deal with FUD in the marketplace?
This will ferret out if they know how to compete — or not.
9. Do you work with sales engineers and sales support? If so, what role do they need to play at this stage when capital is finite?
This will ferret out if he/she can play at an early-stage SaaS start-up successfully — and if he knows how to scale once you scale.
10. What will my revenues look like 120 days after I hire you?
Have him/her explain to you what will happen. There’s no correct answer. But there are many wrong answers.
ok let’s make it 11 actually:
11. How should sales and marketing work together at our phase?