Lenny's Podcast: Product | Growth | Career
Building a world-class sales org | Jason Lemkin (SaaStr)
Episode guests
Podcast summary created with Snipd AI
Quick takeaways
- Success in sales requires founders to close the first 10 customers and dedicate 20% of their time to sales.
- Hiring at least two sales reps and extensively interviewing candidates focuses on passion and understanding of the product.
- Effective compensation plans prioritize motivating sales reps to close deals over top-line numbers.
- VP of Sales hire should occur after two reps hit quota; VP role involves active selling and understanding product.
- Consistently defining next steps in sales meetings maintains momentum and progress towards closing deals.
Deep dives
Hiring the First Sales Rep
When hiring the first sales rep, it is important to close the first 10 customers on your own as founders and spend more than 20% of your time on sales. You should hire at least two sales reps instead of just one, and thoroughly interview around 30 candidates. Look for quirky individuals with a genuine passion for your product, who have put in the effort to understand it and can effectively sell it. Consider offering an on-target earnings (OTE) package where they keep 100% of what they close in their first three months. Focus on whether a sales rep can close more than they take home rather than worrying about top-line numbers. The key is to create a win-win situation with a comp plan that aligns with your business goals.
Hiring a VP of Sales
Before hiring a VP of sales, ensure that you have two sales reps hitting quota and closing deals. A VP of sales should be brought in when you are ready to scale from three to 300 reps, not as a solution for getting sales going. It is beneficial if the VP of sales carries a bag and actively sells themselves, at least for a period of time. This helps them understand the product, connect with customers, and build a solid understanding of the competitive landscape. The VP of sales should be someone you would buy your own product from, and they should continue to be involved in customer conversations and deals.
Assessing Sales Candidates
During the interview process, ask candidates to sell your product, similar to the 'sell me this pen' exercise. This allows you to see how well they understand the product, identify and articulate customer pain points, and effectively pitch and close deals. They should put in the effort to learn about your product by watching demos, webinars, or explainer videos. Additionally, gauge whether candidates genuinely enjoy sales and have the passion and drive to succeed in the role. Ensure they are willing to meet customers and prospects and have a customer-centric mindset.
Effective Compensation and Quota
In the early stages, focus on creating a compensation plan that allows the sales rep to close more than they take home in their first three months. Prioritize providing enough financial support for them to be successful. Consider a 50-50 split between base salary and bonus for a sales rep's On-Target Earnings (OTE). It is important to ensure that the sales rep can bring in three to five times what they take home in order to achieve profitability and success. The goal is to create a compensation structure that motivates and rewards the sales rep while aligning with the business's financial goals.
The importance of having a next step in sales meetings
In order to become better at sales, it is crucial to always have a next step identified at the end of each sales meeting. This ensures that the momentum continues and progress is made towards closing the deal. The next step could be a follow-up call, a demo for another stakeholder, or any other action that moves the sales process forward. By consistently having a next step, salespeople can maintain engagement and keep the deal moving towards a successful conclusion.
Suggested resources for improving sales skills
Saster University offers a free course on sales that can be helpful in improving sales skills. Another resource is the book 'From Impossible to Inevitable' by Aaron Ross and Jason Lemkin, which provides insights and interviews with top sales leaders. Additionally, Pavilion is a community that focuses on networking and connecting sales professionals with founders, offering opportunities to learn and grow in sales.
Considering trial lengths for sales teams
The ideal trial length for a sales team can vary depending on the specific context and product. It is important to strike a balance between giving customers enough time to fully evaluate the product and ensuring that the trial period does not become overly extended. While there is no perfect answer, it is advisable to consider what is customer-centric and aligned with their needs, rather than solely focusing on the pressure to close deals quickly.
Being cautious about product teams taking on P&L responsibilities
While some product teams are taking on P&L responsibilities and revenue goals, it is essential to be cautious about potential negative impacts. It can be counterproductive to pressure the product team to focus solely on generating revenue without real customer-centricity. The emphasis should be on building long-term value for customers and fostering a customer-centric approach rather than becoming overly focused on hitting short-term revenue targets.
Importance of Offering Free Products
Offering free products is crucial for software companies because it leads to better software and onboarding experiences. Products without a free edition often cut corners and lack the necessary focus on good onboarding. On the other hand, products with a free edition invest in engineering cycles to provide a free version, which benefits all customers, including enterprise clients. Having a free edition allows customers to experience the product and eventually convert to paid users, making it a valuable strategy for growth and customer acquisition.
The Year of the Customer and Product
This year, product teams and companies should prioritize being the voice of the customer and delivering great products. Sales has faced immense pressure in the past, and now it's time for product teams to step up and take the lead in making customers happy. By focusing on working harder and delivering great products, product teams can inspire the entire company and inject energy back into the organization. The control over the code and the product gives product teams the opportunity to do great things and make customers happier, contributing to the overall success of the company.
Jason Lemkin created and runs SaaStr, the world’s largest community for B2B/SaaS founders, and is the managing director of SaaStr Fund, a $90 million venture capital firm specializing in early-stage enterprise investments. He is also the mastermind behind two major tech conferences each year—one in the Bay Area, drawing in over 15,000 people, and another in Europe, with a crowd of more than 3,000 SaaS executives, founders, and entrepreneurs. Before SaaStr, Jason wore many hats: CEO and co-founder of EchoSign (later bought by Adobe), vice president at Adobe Systems, co-founder and president of NanoGram Devices Corp., vice president of NeoPhotonics, and a senior director at BabyCenter. In our conversation, we discuss:
• How far you should go without a salesperson
• Signs it’s time to hire salespeople
• Why you need to hire two salespeople
• How to compensate your salespeople
• How to interview salespeople
• When to hire a VP of Sales
• How to prevent their flaming out
• How to scale your sales org
• How to improve the relationship between your sales and product teams
• Much more
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Find the full transcript at: https://www.lennysnewsletter.com/p/building-a-world-class-sales-org
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Where to find Jason Lemkin:
• X: https://twitter.com/jasonlk
• LinkedIn: https://www.linkedin.com/in/jasonmlemkin/
• Website: https://www.saastr.com/
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Where to find Lenny:
• Newsletter: https://www.lennysnewsletter.com
• X: https://twitter.com/lennysan
• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/
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In this episode, we cover:
(00:00) Jason’s background
(06:18) The importance of sales in B2B businesses
(11:23) Signs that you should start hiring salespeople
(14:19) Attributes to look for in early sales reps
(19:08) Hiring a VP of Sales
(26:43) The role of a VP of Sales
(30:06) Interviewing salespeople
(45:16) Determining sales compensation and quota
(53:34) Transitioning from 100% commission to a smaller percentage
(56:58) Indicators of a hard-to-sell product
(59:39) Scaling the sales organization
(01:05:26) Understanding sales roles and titles
(01:10:02) Product involvement in sales, and vice versa
(01:20:32) Thoughts on product teams taking on P&L responsibilities
(01:27:23) One thing founders can do to become better at sales
(01:31:02) The ideal trial length for a free trial sales team
(01:39:50) Closing thoughts
(01:41:43) Lightning round
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Referenced:
• Marc Benioff on LinkedIn: https://www.linkedin.com/in/marcbenioff/
• Snowflake: https://www.snowflake.com/en/
• Yamini Rangan on LinkedIn: https://www.linkedin.com/in/yaminirangan/
• Salesforce: https://www.salesforce.com/
• HubSpot: https://www.hubspot.com/
• Twilio: https://www.twilio.com/
• Cloudflare: https://www.cloudflare.com/
• GitHub: https://github.com/
• Columbo: https://www.imdb.com/title/tt1466074/
• What is Davos and why is it important? Your guide to the World Economic Forum’s annual meeting: https://www.euronews.com/next/2024/01/15/what-is-davos-and-why-is-it-important-your-guide-to-the-world-economic-forums-annual-meeti
• Adobe: https://www.adobe.com/
• Satya Nadella on LinkedIn: https://www.linkedin.com/in/satyanadella/
• Glengarry Glen Ross on Prime Video: https://www.amazon.com/Glengarry-Glen-Ross-James-Foley/dp/B002NN5F7A
• The Wolf of Wall Street on Prime Video: https://www.amazon.com/Wolf-Wall-Street-Leonardo-DiCaprio/dp/B00IIU9FQY
• A step-by-step guide to crafting a sales pitch that wins | April Dunford (author of Obviously Awesome and Sales Pitch): https://www.lennyspodcast.com/a-step-by-step-guide-to-crafting-a-sales-pitch-that-wins-april-dunford-author-of-obviously-awesom/
• Pipedrive: https://www.pipedrive.com/
• Sam Blond on LinkedIn: https://www.linkedin.com/in/sam-blond-791026b/
• Gong: https://www.gong.io/
• Zendesk: https://www.zendesk.com/
• ZoomInfo: https://www.zoominfo.com/
• Apollo: https://www.apollo.io/
• Daniel Chait on LinkedIn: https://www.linkedin.com/in/dhchait/
• SAP: https://www.sap.com/
• Lessons on building product sense, navigating AI, optimizing the first mile, and making it through the messy middle | Scott Belsky (Adobe, Behance): https://www.lennyspodcast.com/lessons-on-building-product-sense-navigating-ai-optimizing-the-first-mile-and-making-it-through-t/
• VistaPrint: https://www.vistaprint.com/
• Procore: https://www.procore.com/
• Matt Mullenweg on LinkedIn: https://www.linkedin.com/in/mattm/
• Wordpress: https://wordpress.com/
• SaaStr University: https://app.saastruniversity.com/collections/20252
• From Impossible to Inevitable: How SaaS and Other Hyper-Growth Companies Create Predictable Revenue: https://www.amazon.com/Impossible-Inevitable-Hyper-Growth-Companies-Predictable/dp/1119531691
• Pavilion: https://www.joinpavilion.com/
• Top 10 Learnings about Free Trials with Tomasz Tunguz: https://www.youtube.com/watch?v=tfQNJpnxmMw
• The Terminal List on Prime Video: https://www.amazon.com/The-Terminal-List-Season-1/dp/B09HYNH8TK
• Top Gun: Maverick on Paramount: https://www.paramountmovies.com/movies/top-gun-maverick
• OpusClip app: https://www.opus.pro/
• OnePlus Open smartphone: https://www.amazon.com/OnePlus-Dual-SIM-Unlocked-Smartphone-Hasselblad/dp/B0CHN7M531/
• SaaStr conferences: https://www.saastr.com/events/
• Marketo: https://go.marketo.com/about-marketo-landingpage-emea.html
• Zoomtopia: https://zoomtopia.com/
• Money20/20: https://us.money2020.com/
• Shoptalk: https://shoptalk.com/
• Jeff Lawson on LinkedIn: https://www.linkedin.com/in/jeffiel/
• Eric Kwan on LinkedIn: https://www.linkedin.com/in/erickwan/
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Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.
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Lenny may be an investor in the companies discussed.
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