Sales Reps & Startups
Something I’ve come across all too frequently is the young company who, in an effort to scale, hires too many salespeople in a short time frame. After what is always a difficult process of raising funds, this tech startup quickly jumps into building a large sales force. Yet the company often does so without considering its ability to support this expansion, nor does it predict the consequences of hiring too many, too quickly.
I first encountered this issue years ago while working at a tech startup. Sales were growing strong in the Northeast and the company was looking to expand. With the assumption that existing success could be replicated in other regions, the management team began hiring sales reps in California, Texas, Florida, and Chicago. But what seemed like a sound decision ended up holding back progress over the next few years. In reality, the business couldn’t support such a rapid expansion of its sales force.
Now, as a recruiter for tech startups, I see this happen repeatedly. When building a new sales team, startups should determine if they are expanding too quickly, and consider the impact of such a move. The way a business scales its sales team impacts the success of those hires, and affects how you allocate resources in other important areas of the organization.
Hiring too many sales people early on will have an impact first and foremost on the success of the hires themselves. The notion of building a larger sales team often fails to account for the ability of the business to handle such a large addition of employees. The issues begin with the capacity for the company to train these employees, which is a large undertaking, even for a small sales team. This especially comes into play for the early stage startup, where the product and strategy may lack full conceptualization or definition. In such conditions, it will be difficult to shape a single sales rep, much less an entire team.
The management of a large sales force early on can prove difficult as well. With no prior learning experience to draw from, and a relatively young support and management staff, addressing critical issues with the sales team can be incredibly challenging. Working through obstacles with a small team early on allows for lessons to be passed on to future hires, and for more senior salespeople to become mentors in the long run.
And don’t forget the impact that scaling your sales force too soon can have on that group’s quality results over the long term. Early stage startups know too well that their early hires need to be top performers. And for sales professionals, top talent is drawn to where the action is. Yet startups must work hard in the beginning to generate demand and awareness for their product or service. If there isn’t enough demand to go around, what could have been your top performers might jump ship for better opportunities.
The financial impact of unnecessary hiring is apparent for early stage startups. In a process that is already time and resource intensive, attracting the right talent can be difficult early on, and can result in even higher costs. Given the financial constraints that most tech startups face, wasting capital on unnecessary hires can have a significant impact. An unnecessary hire also means that the hiring manager’s time is wasted, along with the training party’s time.
Beyond the direct cost of hiring, consider the opportunity cost of unnecessary hires. The capital needed for both hiring and paying employees is obvious, but consider where that capital could have been better utilized. Early stage startups have several areas of business that require focus and resources. Using resources in one area often means sacrificing in other facets of the business early on. Scaling a large sales team can be a distraction from other areas that should be receiving the focus otherwise. Consider what your hiring and training manager could have been working on had they not been focused on unnecessary hires. Consider where else the capital put towards hiring would have gone otherwise, and the returns that could have been made. It may seem like a sales team lacking in size would hinder your growth, but so can a lack of development and progress in other areas.
Looking back on my time with my former employer’s tech startup, a more pragmatic approach early on could have saved them valuable resources. Perhaps adding a single additional location or vertical would have improved the development of the company’s business structure. Rather than hiring 15 new sales reps, they could have expanded more slowly, focused on branching into a single marketplace, and used the knowledge from those successful expansions to provide direction in new markets in the future. They also could have avoided the unnecessary hiring and subsequent loss of several sales professionals, leaving themselves with resources to be used elsewhere. Had there been more focus on minimal hires rather than a larger team, the company could have focused on hiring the right quality and fit for their needs.
Hiring too many salespeople in the early stage of a company can have an effect on several aspects of the business. The number of people you need and the timeline for hiring will vary from startup to startup, but the benefits of maintaining a practical hiring pace will be apparent, regardless of the company.
Steady growth allows for executives to gradually monitor the needs of a sales team and adjust accordingly. As I have experienced, expanding too quickly can cause an unnecessary waste of resources. Early stage tech startups should focus on the quality of salespeople hired, and not necessarily the quantity. Hiring top sales people at a steady pace can not only help ensure the substantial growth of a quality sales team, but can save a company time and money in the long run.
Mark Cergol, a senior executive recruiter at Millennium Search, has over 20 years of experience in software sales. Working with a variety of companies, including early to mid-stage startups and large publicly traded organizations, Mark has developed a deep understanding of the tech industry. The knowledge and network of long-term relationships Mark has built through the years gives him an edge on the competition, making him a top recruiter for technical sales and marketing positions.