When is the Right Time to Hire a VP of Sales in a SaaS Business?
By Harry Lewis. Harry is a Senior Director at Zeren, and leads our Commercial hiring vertical in the UK.
Hiring a VP of Sales is one of the most important decisions a CEO will make and is a pivotal moment for any SaaS platform looking to accelerate revenue growth. Knowing the right time to hire will be different for every Software business, and be dependent on the number of employees, the company growth trajectory over the next 2 to 5 years, their target market (SME or Enterprise), and the stage of the business (Large Seed through to Series B).
The post-COVID emergence of the digitally-remote model has brought an added dimension to search strategy, potential talent pools, and international expansion, with many businesses now taking “the best person wherever they are located” approach to Senior Leadership appointments. Salesforce for example now advertise their vacancies according to time zone versus location.
Getting the timing right is vital, as both hiring too early or hiring too late can be detrimental to the success of your business; on one hand, you do not want to hire your VP of Sales and have them leave in 12 months because you do not have the infrastructure in place, and equally you do not want to be the Founder that cannot relinquish control of running the Sales operation.
According to Jason Lemkin, Co-Founder & CEO of EchoSign (acquired by Adobe) “70% of SaaS First VP Sales don’t make it to 12 Months. It’s one of the most common, and devastating, mis-hires in startups.”
So, when considering the importance behind this crucial hire, presented below are some useful benchmarks to follow to determine if the time is right for you to hire a VP of Sales:
- Is your business currently turning over 1 million to 3 million ARR?
- Is your customer base increasing and is your revenue growing?
- Have you defined your Sales process and target markets?
- Do you have a strategy for international expansion?
- Is your product ready for rapid scaling into larger/enterprise customers?
- Do you have a marketing plan and know why your customers buy, stay, and leave?
- Is your business too early stage to warrant a CRO?
What are the Responsibilities of a VP of Sales?
“A true VP of Sales is not someone you hire to get sales going at your start-up. It is someone you hire to accelerate pre-existing sales into the upper echelon of success.”
What this implies, is that a VP of Sales is someone you should bring into your organisation when your revenues are in the low millions and you need to achieve the following: to scale turnover by setting an ambitious, achievable, and realistic Sales strategy; to hire fantastic Sales talent; to focus on winning net new logos; to reduce Sales cycles, and to focus on larger value deals.
A first VP of Sales hire will typically report into the CEO and will help drive company growth by building the go-to-market commercial strategy, by being close to the customer, and by setting the firm’s internal Sales structure. They will also spearhead growth by installing the right Sales methodologies (MEDDIC, Challenger etc.), by becoming a Manager of Managers, and by increasing revenues somewhere between 6-fold and 10-fold.
Traditionally, this VP of Sales will grow, manage, and train a wider team of Sellers (AEs), Pre-Sales and Inside Sales (Lead Generation), with a ‘Head of’ for each department reporting into them. Over the first 12 to 24 months, as they successfully grow the Sales outfit and scale revenues, the CEO will often look to bring in a CRO (or sometimes promote their VP of Sales) to manage the entire commercial operation, inclusive of Sales, Customer Success, Account Management and Marketing.
What is the Right Type of VP of Sales to Hire?
The answer to this question is different for every business, whether small, medium, or large, and there is a certain VP of Sales you should consider hiring in each circumstance.
If you are a Seed-funded business, looking to go for a Series A funding round, then you might think about hiring someone who is closer to the client, is happier starting out with a smaller team, has a more entrepreneurial mindset, is passionate and knowledgeable about your Software/sector and is a great cultural fit, as they help you move up the food-chain and into a more enterprise environment.
If you are a well-funded Series B and upwards business, then you will likely want to hire someone who has successfully taken a company through additional funding rounds or equally an IPO or Exit. This typically means the individual: has managed large Sales pipelines across multiple territories; has sold into large enterprise clients and structured 6-figure plus ACV deals; is proven at managing existing Sales teams and building structures on top of them, and is brave enough to make tough hiring structures, all without damaging the hard work that has gone into establishing the core Sales team that brought you there in the first place.
The reality is that a good VP of Sales will allow you to bridge the gap of having to hire a CRO too early, which is often an extremely damaging hire to get wrong. By hiring a VP of Sales before a CRO you are allowing the business the opportunity to hire someone more experienced when the business is ready to take the next step, or alternatively you can promote your VP of Sales to your CRO if they are showing all the right traits to be able to take on a more senior, commercial leadership role.
How Much Should a VP of Sales Cost?
It is important that you get this right, as it will not only determine the available talent pool on offer to you but also the immediate engagement and long-term future of your VP of Sales. Any good Salesperson needs to have good financial incentive to win new business, but a VP of Sales needs both short-term and long-term incentives for multiplying your revenues by 6-fold to 10-fold (and beyond) over the course of 24 months. The size and stage of your business typically determines the package on offer, but from what we see in the current market an attractive package should look like the following:
- £120,000 (Seed) to £175,000 (Series B+) Base Salary
- 100% Uncapped OTE (based on company revenue performance and/or growth objectives)
- 6-Month Guaranteed Commission (short-term incentive)
- Equity (long-term incentive)
- Seat on the Senior Leadership Team
Great VPs of Sales operate differently to Sales managers and are vital to any business looking to dramatically scale revenues within 12 to 24 months, by creating and implementing a go-to-market strategy and identifying new opportunities and directions for the business to move into.
They have a high-level of EQ (emotional intelligence), are Managers of Managers, know when the right time to hire is and equally when to make tough decisions, but ultimately create a great atmosphere for Sales teams to thrive in.
Ultimately, the VP of Sales plays a key role in determining a company’s high-growth success, takes the pressure of new business away from the CEO, and in return, should be rewarded very well for achieving ambitious growth targets.
If your challenge is to grow your business in international expansion and revenue the answer will be found through exceptional Sales leadership, and at Zeren we have a wealth of experience in delivering exactly that for our clients; Sales leadership that dramatically shifts the needle.
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