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Simple Math to Set Up a Sales Team

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Re: Simple Math to Set Up a Sales Team

#11

Post by antupis »

raiyu wrote: post #7
npsomaratna wrote: post #5

Earlier quoted context omitted.

Question: how do you guys structure this at DO?

Don’t get me wrong I get that many companies do this and it’s the industry norm when it comes to enterprise sales but on average I think the incentive structure leads to a number of issues and sure there can be stand out sales folks that aren’t selling but really aligning with the customer, but can’t go based on exceptions, have to look at the average sales person to see what kind of an individual that incentive stru…

I think this concept is pretty similar what Peter Thiel suggested at Zero To One

“Like acting, sales works best when hidden. This explains why almost everyone whose job involves distribution— whether they're in sales, marketing, or advertising— has a job title that has nothing to do with those things. People who sell advertising are called 'account executives.' People who sell customers work in 'business development.' People who sell companies are 'investment bankers.' And people who sell themselves are called 'politicians.' There's a reason for these redescriptions: none of us wants to be reminded when we're being sold.”

Re: Simple Math to Set Up a Sales Team

#12

Post by tweetle_beetle »

csa wrote: post #3
raiyu wrote: post #2

I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…

I’m not sure what line of work you are in, but I will humbly suggest that you probably have not worked with a good sales person. Good sales people (perhaps mostly from good orgs) are typically very welcomed into an org because they will help solve problems or point you to solutions if they don’t have it themselves. These are the sales people I know who make the most money, and it’s fairly effortless for them since th…

Like in any trade, I'm sure that the best are great at what they do, but I suspect I'm not alone in finding that the vast majority of my interactions have not been with a good sales person (and maybe by your definition not with good orgs either).

I've never been told that I might be better off going elsewhere. Many times I've been told that whatever problem I describe, they can handle it, or my problem isn't what I think it is and they can handle it. I feel like short term incentivisation tends to promote dishonesty - most organisations don't seem to have feedback mechanisms to deal with a poor sales process.

And like most trades, I'm sure the answer is to take it more seriously, train better, invest more in the people, etc. But the reality is for most sales jobs, as a former colleague once told me, you're never more than 2 missed targets away from being let go.

Re: Simple Math to Set Up a Sales Team

#14

Post by jhowell »

raiyu wrote: post #2

I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…

> One is over paid, the other under paid. If companies just created a sales team from their highest performing customer support reps and didn’t give them quotas or bonuses I think the model would still work as well from a revenue perspective

Overpaid in commissions from finding new business? Sounds like a happy SaaS.

Re: Simple Math to Set Up a Sales Team

#15

Post by bjarneh »

raiyu wrote: post #2

I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…

That's a really good idea.

I cannot help to think that this is connected to the horrid economic theory about "cost" and "profit" centers. The sales team create income, and the customer support is just a cost, so why spend any money on them? Why even have them here, can we move them to India?

Re: Simple Math to Set Up a Sales Team

#16

Post by LunaSea »

jhowell wrote: post #14
raiyu wrote: post #2

I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…

> One is over paid, the other under paid. If companies just created a sales team from their highest performing customer support reps and didn’t give them quotas or bonuses I think the model would still work as well from a revenue perspective Overpaid in commissions from finding new business? Sounds like a happy SaaS.

Who else gets paid in commissions in a SaaS business?

Seems like there really shouldn't be any reason for being paid in commissions.

Re: Simple Math to Set Up a Sales Team

#17

Post by twic »

ZephyrBlu wrote: post #9

Is 10x base salary as a quota standard? It seems like a really high target.

Look at it the other way round: the company is bearing a cost 10% of revenue just in commission to salespeople. If all salespeople are exactly meeting quota, then the total cost of sales is 20% of revenue. The same applies to their manager, at 2.5%, for a total of 25% of revenue. The remaining 75% has to pay for everyone else in the company, and external costs!

Re: Simple Math to Set Up a Sales Team

#18

Post by twic »

raiyu wrote: post #2

I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…

The one place i workd with customer support people, they had a commission structure similar to sales, but based on retention. Is this not normal?

Re: Simple Math to Set Up a Sales Team

#19

Post by jasode »

raiyu wrote: post #2

I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…

>and didn’t give them quotas or bonuses I think the model would still work as well from a revenue perspective,

Maybe our intuitions and idealism on what motivates salespeople don't match reality.

E.g. The CEO of Pluralsight tried to remove commissions and quotas for salespeople and he even wrote an article about it[1] -- but he later changed his mind. You can read latest Glassdoor posts from salespeople about being paid commissions and there was also a post on HN.[2]

In other words, if you assigned the role of sales to customer support reps, they may not be persuasive enough to close future sales and you lose revenue. This means there won't be any money to pay a salary to the customer reps to continue acting as "salespeople".

It really depends on the product. If it's a popular consumer product like an Apple iPhone, the Apple store employees can be passive "order takers" instead of commissioned salespeople. But if it's a B2B SaaS, you'll most likely need traditional monetary incentive structures to motivate salespeople.

[1] https://www.inc.com/aaron-skonnard/why-sales-commissions-don...

[2] https://news.ycombinator.com/item?id=15234762

Re: Simple Math to Set Up a Sales Team

#20

Post by Geee »

raiyu wrote: post #2

I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…

Salespeople are paid to get punched in the face. They are failing at their job most of the time, so the commission is needed to keep them motivated.
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