Why VP Sales is both the Most Critical and the Most Tricky leadership hire for most Startup CEOs.
Updated: Sep 28, 2022
The VP of Sales role may be the single most challenging and arguably the most important hire that a scaling tech company will make. When 950 founders were polled on the subject of most challenging hires, the leading answer was in fact Sales leaders, edging out other critical executive functions including Engineering, Marketing and Product.
To illustrate just how difficult it is to find the right sales leader, consider the jaw-dropping statistic that almost 70% of the first VP Sales hires at SaaS companies don’t make it to the first 12 months.
A well-aligned sales leader can completely transform your growth trajectory, whereas a misaligned hire can be devastating if you miss market opportunities and fail to build the team and processes you need.
So why do so many smart CEOs get it wrong?
We could write a very long book on this, but here are the basics. We see many hiring teams underestimate the importance of creating specific and hyper-targeted criteria for this hire. You need to think through who will strongly align with your company, product, stage, market and growth objectives. And as with other functions, great sales leaders have fundamentally different skills and strengths than the top individuals on their teams. Even when there are examples of exceptional sales reps who became great leaders, this can’t be assumed as the rule. There are A LOT of ingredients to take into consideration with this hire to make sure you are setting your company up for long-term success. A few key considerations:
1. Timing is everything.
There are risks with hiring a sales leader too early, and just as many risks if you move too late. If you talk to 10 different startup founders about the best time to hire your first VP Sales, you’re likely to get 10 different opinions because it truly depends on the specifics of your company and your market.
Many start-ups who hire a VP of Sales too early, put themselves at risk of failing to capitalize on your investment. The true value of many Sales leaders is their ability to launch your business into the next level of success, not in building a team and processes from scratch. What stage is your business at, and what will this leader need to accomplish in the first 12 months to get you to the next level?
While it’s a reasonable strategy to bring in a ‘player-coach’ VP of Sales who manages a team and their own personal quotas early on, it’s not wise to invest this amount of money into a resource if you’ve yet to validate your product-market fit, pricing and revenue model.
On the other hand, waiting too long to make this hire means the founding team is likely heavily wrapped up in driving sales on their own while burning cash and taking their attention away from other critical areas such as product and strategy.
Source: Tomasz Tunguz
Most start-ups look to hire their first Sales leader only after they’ve reached $1-2M in ARR with a small team, but available capital, domain, market forces and product development all play a large factor in this timeline.
Timing also plays a key role in determining the type of sales and leadership skillsets that will best serve you at your current stage. A leader who knows how to navigate the journey you're on, often brings more value than one with domain knowledge or a rolodex (ya we know no one actually uses a rolodex, but you get the point!)
Understand what you need to accomplish to reach your 12-24 month goals, and then hire for that. If you're a start-up, it is probably someone scrappy who can find early adopters, bringing a product to market without slick marketing, safe brand or established process and teams.
If you have traction and now need to scale, you need a Sales Leader build on early wins with happy customers. These Sales Leaders are focused on scaling the sales team, ramping up process and metrics and creating repeatable success. You may be looking for the VP with that high growth experience but often the second in command knows what to do and is keen to step up, if they will understand the unique nature of your sales cycle and customer behaviour.
2. Market + skillset alignment is critical
The differences in market type, size, and conditions drive the ideal strategy and points to why there is such varied results from Sales leaders who may otherwise appear similar. While you may presume that a sales leader’s successful track record is a good measure of future performance, many companies have learned the hard way that this isn’t always the case.
There are ground-up builders, hands-on product evangelists, B2C metrics junkies, pure leaders, B2B big game hunters .. we could go on, but you get the gist. Finding the right type for your company and stage requires careful consideration of your goals, market, buyer, team makeup and more.
Some of our clients sell into markets with complex technical needs, or very unique business models, where years of education and experience can’t be replaced by a crash course while onboarding. But in many cases products have broad market reach and business cases that are reasonable to learn, so candidates from a variety of domains can leverage their experience and skills to be successful. The more complex the sales process, and the more targeted your product is to one particular buyer, the higher the impact of existing domain expertise will be on your new hire’s ramp-up time.
3. Avoid Big Brand Pedigree
Generally speaking, selling in competitive markets as an emerging player requires someone who has experience breaking into markets without the backing of a big brand or an extensive inside sales and marketing support engine. Someone who has experience at a market leader like Workday or Salesforce may be excellent at orchestrating large enterprise deals, but may struggle at a smaller company fighting for market share against leaders like these. Similarly, building a high-volume sales strategy in the SMB market at smaller deal sizes requires a completely different approach than closing longer cycle 7-figure enterprise deals.
Thinking about your market and buyer in the context of hiring your VP Sales will help you understand just how wide of a net you should be looking at casting when building your candidate pipeline. Market and domain experience certainly don’t supersede pure sales and leadership talent, but you should know when it matters enough to be on the must-have list in the hiring process.
4. Values are a powerful force.
Making sure that your VP of Sales hire is strongly aligned with the mission behind your company, your roadmap to achieve growth, and the culture of your company is not only critical for their success, but is also extremely influential on how long this sales leader stays on board.
We’ve seen the average tenure of VP of Sales at SaaS companies plummet over the past several years, with the majority of first-time hires leaving before the 12-month mark. Considering all of the inherent complications associated with finding the right VP of Sales that we’ve already discussed, this shouldn’t come as a major surprise. However, what we haven’t dug into yet is that sales leaders are also leaving even when they ARE experiencing success at your company.
Sales Leaders are typically opportunistic and driven by earning potential, which contributes to their sales edge and competitiveness. Many companies do everything right during the hiring process to land a dream candidate that has immediate success, and still that person leaves before the true investment is realized. Your prized sales leader will be noticed and headhunted, which is out of your control. Part of retention is ensuring that the rewards for success are aligned and paid both over the short term (commissions) and over the long term as well (equity and longer term bonuses). But another lever to ensure you hire someone who will stick is to find a sales leader who is intrinsically motivated by you mission and impact, and who connect with the leadership team on shared values.
There is a pile of research on the power of intrinsic motivators. It’s up to you to uncover this value alignment in candidates (hint: look for evidence of alignment, don’t just take their word for it!), because finding a sales leader who is passionate about your mission might just be enough to break the cycle of hopping.
That’s a lot of deep thinking and reflection to undertake before even getting into the specific details of what you’re looking for in a candidate! But when you start digging into the numbers, you quickly realize that this is one hire that you are not going to want to take lightly.
Recent data shows VP Sales compensation averaging low-mid $400k, and up to $600K + equity.
If you’re a first-time founder reading this, these numbers may come as a huge shock to you. Don’t fret.
Sales leaders prove their worth in very tangible, measurable ways because comp is directly tied to a number. Spending almost $400K on one employee may seem daunting at first but remember - about half of that is dependent on them bringing you cash flow. When you snag a great sales leader they more than “prove out” their value within the first year. It is important to note here that while this also seems like the easiest role to measure, if you have longer sales cycles you will want to carefully understand pipeline metrics so that you can confidently anticipate longer-term results.
With an investment of this size in one resource and a long history of sales leaders leaving before the 12-month mark in the tech industry, you would be wise to mitigate as much risk as possible by making sure you are strongly aligned with your leadership team on exactly what it is you need before diving into the hiring process. And once you’re in search mode be sure to avoid these common mistakes we’ve seen founders make during the evaluation process!
As always, the Artemis team is ready to help whether you have questions as you prepare for a major hire or you’re looking for an experienced search partner to manage the full search process with confidence.