Structuring Sales Teams

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How to Structure a New Sales Team at a Startup

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  Simple Math to Set Up a Sales Team

  David Sacks, Co-Founder, Craft Ventures

  David covers every aspect of setting up a sales team: individual plans, team plans, territories, expansion and Renewals, and more. Some of the tips he provides include: • A standard commission rate for Saa S products is 10%. For example, closing a $100,000 ARR deal generates a $10,000 commission. • For an AE hitting quota, their variable pay will equal their base salary, resulting in a 50/50 split between base and variable Compensation. • The typical quota for an AE will equal 10 times their base salary. This is known as the "Rule of 10." • Once an AE hits quota, their commission rate should increase to 15% on incremental sales to incentivize exceeding quota. • It typically takes new AEs 4 months to hit productivity. They start with a lower quota and higher guaranteed pay during the ramp period. • A manager's quota should be set at 80% of their team's total quota capacity. Their commission rate depends on their target OTE. • If a team is hitting over 70% of their quota capacity, that indicates the team can hire more AEs. • An AE typically generates around 50% of their own leads. They rely on marketing for the rest. • New territories, quotas, and plans should be rolled out quarterly at Sales Kickoff Meetings. • Allowing an AE to keep an account for 12 months after the initial close incentivizes land-and-expand deals for that AE.

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  Building Startup Sales Teams: Tips For Founders

  Dharmesh Shah, Founder and CTO, HubSpot

  Dharmesh provides tips for founders setting up a sales team: • The founders should be selling in the early days, not Hiring Salespeople too early. • Focus on revenue, not fancy titles. Hire for "sales", not "VP of Sales". • Hire salespeople gradually to learn what works best for your product and customers. • Be prepared for a culture shock if you're not used to working with salespeople. They can be different from engineers and founders. • Keep Compensation plans simple at first, then refine later. • Apply agile methodologies to sales processes - iterate and improve. • Salespeople will act rationally based on incentives, so set incentives properly. • Track customer happiness and success, not just deals closed. • Understand your business economics like cost of customer acquisition and lifetime customer value. • Use a CRM system to track sales data for insights and improvement.

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How to Structure Sales Teams at Medium & Large Companies

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  How Should You Structure Sales Teams for Optimal Performance?

  Tomasz Tunguz, Managing Director, Redpoint Ventures

  Tomasz explores real-world data on the effectiveness of how many direct reports a sales manager should have: • Smaller sales teams with spans of control of 7 or less tend to perform better and attain higher quotas. Teams with spans of control over 7 attain less than 50% of quota twice as frequently. • Teams with spans of control of 7 or less are twice as likely to attain 80-95% of quota, indicating smaller teams are more likely to outperform. • Hypergrowth companies may hire more managers to scale teams, resulting in smaller spans of control during hypergrowth. • Senior sales team members need less Coaching, so team performance could also depend on salesperson experience.

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  How would you structure a sales team to get you from $10s to $100 millions in revenue?

  Jason Lemkin, Founder, SaaStr

  Jason provides a ton of tactical tips on how to structure a sales team at $10m in ARR: • He recommends hiring an experienced VP of Sales to structure the sales team as the company approaches $10 million in ARR. Doing it yourself is too complicated. • As the company grows past 10 reps, they will need a Director of Sales to manage every 8-12 salespeople and SDRs. • The company will need a VP of Sales to manage every 30-50 sales reps. As the team grows past 100 reps, they will need multiple VPs. • The company should segment sales into Small, Medium, and Large customers as they approach $10 million in ARR. • The company should open local offices in other geographies once that area reaches $1-2 million in revenue. • The company will likely need 1 Sales Engineer for every 8-10 sales reps to support the technical side. • The company will need a Sales Ops/Enablement professional for every 30-50 salespeople to manage training, onboarding, territories, and Compensation plans.

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