Avoidable Mistakes In Hiring Your First Sales Rep For a Startup with Edward Golod and Colin Kleine
Hey, how are you going? Hey, I’m peachy. Yeah, that’s new in New York, how are you doing?
There you go. Well, that’s an Australian being confused. And what that saying is, like, aside from that and good to catch up with you again, I’m really really looking forward to discussing the next topic with you.
I suppose you and I have different psychology when it comes to this, you have led some major staff companies throughout your history, whereas my background is very much in recruitment, and it’s hiring for startups inspiring for major staff companies.
Let’s look at avoidable mistakes that companies make when they’re hiring salespeople.
So let me put it out there. You’ve worked at the Teradata is of the world, you worked for these major vendors. What are some of the mistakes that you have seen companies make when they’re hiring salespeople?
Wow, great question. So the first mistake is the difference between verbal and written. In other words, a persuasive salesperson is one who can make a point and influence people, and get them excited.
And a mid-level or even senior-level hiring executive can get a bit enamored with a good resume good stories, and then hire them. And those reps burn out and they don’t last. So I think the Top Mistake is having the interviews, which you’re an expert at, and running through the committee of interviews, then getting into the testing.
And I don’t mean to test on how fast can you do a puzzle, because they do a lot of math testing. I mean, the NLP testing, and the word mnemonics testing, and the vocabulary testing, and the communication, skill, testing, and I bring that up. And I don’t like testing, by the way, because I don’t like doing it. But I bring it up, because somebody who’s very skilled in communications, enjoys that. But somebody who struggles a bit with the darkness of sales and rejection, and having to do all the cold calling will falter, perhaps. And I think a test will reveal that. So if you’re going to spend three months finding, interviewing, hiring, onboarding, etc, etc, if not longer, why not take 30 minutes?
Look, I completely agree. And you touched on a point which I have seen over and over again, from my experience as a recruiter, a person can come in and they can be extremely persuasive. They can tell an incredible story. And a lot of the time do you know why that is Ed because they’ve had a lot of interview practice and because they’re changing jobs every year to two years.
It’s quite incredible because someone who has been with an organization for let’s say, seven years started as a sales development rep was promoted and an account executive became an enterprise account executive, they’re not going to be as persuasive as others who haven’t done as many interviews.
So for them, it’s quite a new experience that a lot of the time, they don’t actually know how to answer the interview question to really stand out. And that is the classic mistake that I have seen companies make when it comes to the hiring process. So let’s move beyond that. Now.
We’ve spoken about large companies with what you do in Revenue Accelerators, it’s very much around enabling startups or companies looking at getting into the U.S.
How do we help them expand into one of the most hyper-competitive markets?
I know that you have a lot of experience in this. So I suppose what are your thoughts around startups making a wrong hire?
You’re right. When you have say 400 salespeople, you can handle it. Exactly. It’s all brought up to my second point. After testing or bringing my second point, which is a demo, not a presentation. A professional salesperson either does demos or the demos are done for them. And I’m not talking a deep dive. I’m talking about a surface demo. Now people hear me say that and they say that’s ridiculous. Why do you want someone to do a demo?
Because a demo to get a job in a startup doesn’t need to have a salesperson to blow it away. And if they’re good, and they’re an “A” player, they just have to show the product. They may talk about a feature they learned of, and talk about a fictitious account. For example, they can say ” Collin you’re the CTO of this media company, and in this specific area, you’re having difficulty with consolidating particular unstructured and structured data. This is impacting you financially.“
And I think there’s a whole operational conversation, you could say on a job demo interview because you’ve learned the product. But if you’re from media, or if you don’t know media, then you pick financial services. Then you can speak to the client’s environment.
So does this sound like a lot of work? Not really, you do a 10-minute demo, you cover these points. And the CEO of the hiring startup sits there and says, “if this man or woman was doing this on those accounts, wow, this is really incredible.” If you don’t want to put in two Sundays to learn this and not watch the ballgame, then you’re not worth the money they’re gonna pay you. S
I think the demo can be a killer app.
I love what you’re talking about. And I have seen it so many times. And let me tell you about some of my personal experiences. I remember when I was recruiting for a company called X. And they are the ones that told me what a good demo looks like and how they screen candidates. I remember I heard someone interviewing for this company who had spent eight years working in a direct competitor, and they completely bombed. And it ended up happening that that person was never able to actually hold a stable job after that. But if you think that they are a direct competitor, they will do well.
When it came to doing the demo, there are the classic mistakes of reading off the screen. This is not how “S” players do it. From what I have seen, and from what you have seen an “A” can very well engage the audience.
If you have ever seen Tony Robbins speak while the audience is completely bought in from a physiological perspective, as well as from mental stimulation perspective. Because the demo asked questions of the audience, you can read people’s individual cues, if they’re crossing their arms, then chances are they’re bored, it opens up their physiology and it keeps them invested in someone who does a good demo can do that. A
Another skill which I had learned that is crucially important is the closing at the end, I know that it’s just so basic for us. But are they closing at the end? Are they asking the trial questions? And the other point that you raised, which I’m a firm believer in is what are the underlying reasons why people buy?
For example, when a company engages me to define for the salesperson, what they’re really looking for as a pre IPO company, it’s someone who can help them generate additional revenue, and grow an additional share of wallet from their existing customer base. Because that’s going to help them to get the next series round. That’s going to help increase the stock price if they’re a publicly listed company. So there’s a real reason why they’re having this conversation with you. And I think it’s absolutely incredible the size of the sample of demos. I think that’s an incredible way of separating someone and people listening that don’t know
Colin. I mean, we’re talking about 1000’s and 1000’s of applicants in tech and in SAS, and hundreds and hundreds of clients and hundreds and hundreds of hires. You are the voice of reason. You’re right. I think that’s a great way to bring them in a test, especially in the communication demo.
My third is to avoid mistakes when hiring your first salesperson with compensation.
What do you mean comp, like tell them how much their base is and their commission? No comp. I am ashamed to tell you how many clients where they treat comp, like a sewer. They lament about how they have to pay this much salary or bonus, or with stock.
It’s almost hostile. When I hire it is a mathematical conversation, I say, it’s real simple. We have a base salary that you’re well aware of. It was $120,000. I know you’ve heard that before. That’s pretty standard. I’ll check that off. If I was doing a financial conversation. We have a commission. Okay, now, it’ll be another $100,000 at quota. And now to give you an earning a $220,000, and that’s pretty standard in your industry, I’ll check that off.
Then you can present it as “So let’s talk Mr. or Miss candidate about the mathematics. You’re going to get your salary, I don’t know if you’re going to get your commission, what you’re going to do in three months, or how many clients you’ll engage and sell. Because there are a million moving parts. Tell me how you feel you can help my business grow, knowing what I sell, you know how much I sell it for $100,000 a year license. You know, who buys it. And you know, the market I’m in, explain it to me financially how you’re going to get a million and a half dollars in deals done in a year. So you can make that 100,000. And let’s see if my number is high, or maybe my number is too low.“
If I could change the world, I would change one thing. That all companies that hire reps, knowing they may not make the quota and watching them come short, flipping them in a year, hiring another salesperson, would be to balance the hiring process with solid mathematics and probabilities.
The best salespeople that you’ve ever seen, do they sell on value or do they sell on price?
Oh, you know, you hit my hot button. You know, value selling is for the elite. It’s for the 5% people maybe 10%. I’m doing it for 30 years and I am still learning. Unfortunately, nine out of 10 can’t really sell value and they’re not trained on it. And it’s hard for them.
The “A” players, who have their act together, can come in and say you pay me $220,000 I’m going to show you how I’m going to make my numbers. And I’m going to show you how I can make a bonus on top of that because I’ve done it before. So to answer your question, value selling is a hard one.
Let me ask you this, say you’re looking at making a purchasing decision and you had two options that are genuinely transformational value, or price. What would you do?
Well, that’s a no-brainer. You know, I was in between businesses not long ago. And I actually found myself in an interview. And you know, I’m really not wanting to be there. And they were selling some tech communication, chat, collaboration software, and I’m sitting there with these guys. And I just stopped talking. And I just took off my jacket. And in one hour I re-engineered their entire go-to-market, how they sell, how they closed, demo, how they do everything.
Because that’s what I do. And they were blown away. And the CEO said to me, that was the single greatest interview he ever had, I’m going to hire you. I said, Well, that wasn’t an interview, I was showing you how to how grow your company. And it’s what I do. And there’s a lot of value in that financially. And as well as intellectually.
I’m not saying everybody can do that. “A” players can do that. And you need to do that when you’re hiring your first rep because the person hiring the rep is the founder. And let me tell you, that’s like giving your daughter away at a wedding. They don’t do that too easily. So you have to really work pretty hard for that.
If I was to give you two scenarios, to business owners, do you think that they would hire someone because they provide transformational value to this organization? Even if they’re coming in more expensive, they’re providing transformational value to the company? Well, the second one is hiring someone because they fit within a strict budget that they extend, this goes back to the comp compensation. What are your thoughts?
Well, the first one is, is the one that you would get if you were in like a Harvard class right now in like Advanced Business Growth, a transformational seller is a gold. A startup is not transforming. They’re growing and then scaling. But their clients are transforming. Because we’re in the biggest digital transformation wave in the history of the planet in business. So your startups are flexing and changing. And adapting, because the environments in business are dynamic. So a transformational seller will have more muscle in flexing, depending on which way they have to go. There is a very sophisticated hire, but that is an “A” player, and that will change your life.
And now the other thing that I want you to consider is if you’re a rapidly growing startup. We have, let’s just say a strict salary budget with compensation. And on the other hand, we have someone who knows this business can bring immediate value to the company who knows how to scale the company who’s got contacts, who can deliver value, that they bring by them coming in. It’s a statement signing, you pay the money, you send the money because if the return that you’re going to get is for x, that they can change the culture of the company, that they can achieve, let’s just say a million to $1.5 million quota.
Businesses should just pay the money. And I’ve seen this mistake time and time and time again, where companies give me a set budget, that HR was trolling the internet for salary servers. That’s not how you do it. That’s not what successful companies do. Successful companies look at what is our end goal, we’re not just hiring a salesperson for the sake of hiring a salesperson. We’re hiring a salesperson because we want to open up new geography, we want to up our valuation, we need to be able to lead major enterprise accounts, we need to be able to lift our stock price to bring in somebody who has that skill set that has that capability.
Compensation should be adjusted based on the strategic aims and goals of the business and a rigid comp structure, which doesn’t reflect that. That is the reason why a lot of companies never end up making it. What are your thoughts?
That’s a really intricate question. On one hand, I do respect that there are gates, financial gates, and what you can pay. But an owner has judgment. And if you overpay, then the next sales rep may find out and you can have some issues. Probably the best example I’ve ever seen of adjusting comp when you can’t do it, and getting a massive result was Microsoft. You know, when I lost my business due to illegality, and I lost $10 million. I was making a million and a half a year I found myself one day, in a suit in an interview for a job was probably one of the most difficult moments I’ve had, you know, under 40. And I’m sitting there at Microsoft, in a division with a guy who ended up becoming one of my best friends. And the salary was $65,000. And the commission was $100,000. And the stock was off the roof. It was doubling every year. So, I said to him, I can make it on this money. I need like three times that and he couldn’t change it. It’s Microsoft he can’t change that. And I remember John, who’s a dear friend of mine that all these years, said to me “based on your experience running companies, but you know nothing about our industry or the product, and based on what I know about you, I’m going to expand your territory. I’m going to give you more room in New York, and Boston, I’m going to give you part of Canada, I think you’re going to be a great builder and rockstar, and give you more stock options. And give you more commission, but I can’t change your salary.”
And I took the job. And I was grateful. Three and a half of the four years I was number one in the planet, in that business, and I became very close friends with a lot of great people. The takeaway was, I agree with you, you make it happen. You can do it in a plethora of ways.
But you’re right if they got their head in their ass, and they say, this is all I can pay, then that’s maybe all you’re gonna get what you pay for. And that was one great example. And they ended up having 35 people, and everybody had the same comp. But I ended up killing it because he trusted me to do more.
So I love it, you bring it up. We’re very data-driven today. So I’m proud of you. I like these data-driven questions.
Can I just give you one last example? And I’ll make this one really short.
So one of the most successful businesses that I’ve ever seen a company called DL they in three and a half years and grown to 800 staff, one of the fastest-growing companies in all history. When it comes to comp, the way that they structure it is they deliberately make it that it’s easier to hit your OT. So nontarget earnings, you know previously would be, let’s just say what quota attainment of about 70% will be in another company. And then you move into accelerators. Do you know why they do that? Because it motivates the hell out of salespeople because it’s easy to get into accelerators. And when you can see the next level, it just keeps on pushing you and pushing you and pushing you. It’s human psychology.
On the flip side, what absolutely garbage companies do is how can I shop my salespeople out of making money and doing stupid things like setting unattainable quotas, or even worse than my opinion, caps commission. If you don’t understand the psychology of salespeople, the psychology of a sportsperson or an athlete, which a lot of salespeople are since they competitive, they drive to win. So, instead, people disincentivize them from winning or overachieving, and you are shooting yourself in the foot, and you will never be successful as a company.
Yeah, you’re brilliant on that. And I follow GETDEEL. You know, you don’t become a half a billion valuation, and then 5 billion overnight, if you’re not brilliant. And you’re right, this is a really good closing point. Salespeople want accelerators, more than a wolf wants to eat meat. And once you get to the accelerator, and you look at your check, and you made an extra 12 grand, just because you had a bump in percentage. I don’t know anything more motivating than that. But you’re right, the vendors make the accelerator so hard to get to that you’re exhausted by the time you get it. It’s already the 11th month, you can hold the accelerator in dollars. And if you get it early, you’re walking on clouds, you know, you really are a great guy to have on the speed cast.
I’m so happy that you’re my partner because we’re going to talk an awful lot going forward, about comp and about value. Because if you’re doing a million or 2 million or 3 million a year, and you know you have to pay with burden, and all loaded in 300 grand to get someone to sell all and you’re fixated on that. And you know you’re going to get a million to 1,000,000 in sales possibly. And you know your margin. What you’re missing the boat, though with a lot of these startups is how much more can you get?
If you really take somebody and get an “A” player and build their environment, you might get an extra 25 – 35% That extra $500,000 revenue is pure, unadulterated, magnificent margin. You’re already paying me the salary and paying the T a& E. So this is a tactic that companies use and that’s where they start to make really good money. But you got to be a hell of an entrepreneur. We’re gonna talk more about this.
And I’m loving that you were here today. This is Colin. This is Ed. This is Straight Talk. Come join us at Revenue Accelerators with “Out Thinking” and thanks for listening.