Handover from Founder to Head of Sales: What Could go Wrong? Part 1: Mid-Stage Startup

Answer: a lot! Some of the common challenges for founders who want to transition accountability for topline growth to a hired Head of Sales

Almost all of my clients and every startup I know at some stage encounter revenue growth and other challenges related to their sales teams. The symptoms of the challenges tend to follow similar patterns:

• new client acquisition is underperforming and even seemingly achievable revenue targets are missed

• deals only seem to close when founders are personally involved

• the recently hired Head of Sales, who came highly recommended and with significant experience, is not delivering as expected.

In many (but not all) cases, the founders are impatient to hand over responsibility for revenue to someone else so that they can themselves focus on more strategic topics and building the company. I rarely see startups where even the first two externally hired Head of Sales (or similar title) work out. In most companies it seems to take 3+ attempts to find company/head of sales-fit (CHoSF). I spent a lot time reflecting on this topic, for one because it is so common, but also because I was myself the externally hired guy.

‘Das Salestier’ - a traditional (and frequently outdated) view of the sales function

Here are some of the recurring issues that come up in executive coaching

In part 1 I look at earlier to mid-stage startups. In another post, I will look at typical challenges in the growth / scale-up phase. I am writing this with mostly B2B in mind, but while B2C sales generally can be very different, some of the issues are quite similar:

1. Take revenue for an end itself

‘The role of sales is generating revenue, and one can never start to early to instil a discipline of delivering revenue, right?’ Well, it sounds right, but at an early stage it isn’t always (unless you are bootstrapping). In the first (and actually also second and third) phase of going to market, the most important roles of sales are

• identifying customers who are interested in buying the product and understanding why they are interested. At this moment, it is not only important to get ideas for product development, but more importantly, which specific client groups are desperate enough to buy your product even in its rawest form and what that implies about the overall addressable market.

• understanding the overall market and buyers and their needs. Like product development, designing a go-to-market plan is an iterative process where the team constantly tries ideas and keeps what works and changes what doesn’t.

• test different messaging approaches to see what resonates

In summary, learning about the market and optimising all aspects of your offering and sales approach are more important than the relatively small revenue contribution that sales can make to the budget. On the flip side, prioritising revenue generation ‘at all cost’ generates short-term orientation, narrowness of focus, and potentially a defensiveness that likely comes into the way of learning and optimisation. It can also drive a wedge between sales and the rest of the organisation (see below)

2. Lack of a sales plan or go-to-market model

Building on the fist point, the sales team need to articulate hypotheses on how they plan to acquire customers and test if they are right and work as expected. Without a deliberate plan, there will not be any clear knowledge about the mechanics of the market. I have seen a repeating pattern in many companies: sales underperforms (here is the revenue pressure problem again), in many almost all cases because it turns out that the B2B buying cycle takes even longer than expected. Instead of analysing root causes (e.g. is the client segment not suitable as early adopter? is the value proposition clear? …) the sales reps jump from one prospect to the next, with every newer lead promising to close far quicker than the trail of neither won nor lost opportunities. In the end, they might or might not hit the target, but in either case it wont be possible to recognise patterns or consolidate meaningful insight that can direct the next phase of sales development.

3. Sales separated from product

This might sound like a later stage problem, but they start early. The sales team and the rest of the organisation, especially product, need to work closely together and take in feedback from clients. The company not only needs to be able to modify the product according to new costumer insight, but also continually iterate on sales processes. In many cases this requires adaptation also outside of sales, think billing, support, etc..

Of course there can be many other, much more tactical/operational issues holding sales back from delivering to potential. The above come up in coaching, because only the founders themselves can effectively address them.

So what to do about it? When acknowledging the issues, the implications should be relatively straight forward:

• Hire the Head of Sales later. One of the founders should either keep managing sales herself, or work extremely closely with whomever leads the team. While it might be somewhat of an overgeneralisation, in most cases I would consider hiring ideally three sales reps, who can be junior, but need to be very good at communicating externally and internally and learn from clients on their feet. If there is no experienced manager to lead the team yet (which is ok), get an analyst or sales operations associate to support the founder and the sales reps.
  

• Make a plan. Create a model for the market and its segments and articulate hypotheses on how to develop them. Then go out and test them. This doesn’t mean you need to go all Harvard Business Review and slow down, but the team needs to be clear about what they want to validate and learn, when talking to clients. If something works or doesn’t with one client, try to learn from it and try again with a similar client (= same segment, tier), to see, if there is a pattern. Do after action reviews after every client interaction.
  

• Align the company to support sales. This is another reason, why initially a founder can be more effective than an externally hired Head of Sales.
  

• Take a flexible view on revenue and manage expectations. Per the first point above, figuring out who your early adopters are and how a go-to-market could work are more important than whatever revenue number you planned last year with very little information. If you are hitting revenue KPIs all the time, you got lucky, not necessarily smart. And yes, you are probably underestimating how long the B2B sales cycle really is … . As a founder, make sure to manage your board’s expectations accordingly.

By the way, the above is admittedly subjective and my personal interpretation of what I have seen in my own and clients’ experience (and not a framework). Your situation can be very different, depending on a number of factors, most importantly your own mindset as a leader. Rather than taking it at face value, use the observations above as ideas to check your own assumptions and keep asking yourself, to what end you are doing what you are doing?