Do Conventional Sales Quotas Work in a Start-Up?
Conventional wisdom is often wrong. Did you hear that sales people are all solely motivated by money? Did you not know that accelerators, end-of-quarter discounts, month-on-month quota increases, and performance plans for underachievers are what makes the world of sales go around? Most people will tell you that when you are building your start-up sales team, you should reach for the sales management books written by the people who built Oracle and Salesforce. There is another way.
The Challenge of Start-Up Sales Quotas
Large organizations develop quotas using data from previous sales performance and specific firmographic information about a particular geography. In a start-up, you don’t have that previous performance data and you don’t have benchmarks for how much revenue your product can earn in a given industry or location.
Developing sales quotas is also made more complicated by the type of sales people who are going to join your start-up. The people who are most suited to selling an innovative product are entrepreneurs at heart. They are future CEOs, not future VPs of Sales. Sales quotas are a necessary evil for them, something to exceed to keep the adventure going, not something to strive for as an end in itself.
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Start-up sales quotas, if designed incorrectly, can also lead to a culture of ‘elephant chasing’, where everyone in the company, from CEO down, fantasizes about that one big deal that will exceed the years’ targets and help secure that next round of funding. A seasoned CEO will tell you that these big deals a) rarely work out and b) rarely interest ambitious investors who are looking for a high velocity repeatable sales model.
An Alternative Approach
The secret, when building your sales team, is to build sales quotas around your company goals. This means setting targets for the number of new logos, as well as the revenue they bring in. It means setting quotas for building pipeline and generating meetings and it means setting quotas for finding customers who are highly likely be be successful with your product.
Your job as a founder or CEO is to find the people who will react best to working in this environment. Your job is to know when there is enough momentum being built in your pipeline, even if the revenue numbers don’t stack up. Getting away from a mentality of conventional sales quotas will help you do the right things and hire the right people in the short run, and be more successful and have a much greater chance of success in the long run.