How Much Should A SaaS Startup Invest in Sales & Marketing?

How much should a SaaS startup invest in sales and marketing at different stages of the business? This is a very nuanced question, but benchmarks do provide some guidance for what is reasonable. Sales and marketing investment depends on many different factors including establishing product market fit, the business’s sales model (inside, field, freemium), and not least, cash balance and fundraising capacity.

The chart above shows the sales and marketing investment of publicly traded software companies at different revenue levels. It is a box plot, which means the top and bottom of the box represent the 25th and 75th percentiles. The line in the middle is the median, and the dots outside the box are outliers.

The box marked revenue range 10 indicates the median publicly traded company at between $5M and $10M of revenue spent about 90% of revenue on sales and marketing.

Looking in the outer revenue ranges Continue reading "How Much Should A SaaS Startup Invest in Sales & Marketing?"

Ownership – A Defining Trait of a Leader

One of the hardest things for me is to admit is when I’m wrong. It’s hard first to admit it to myself. But harder yet is to admit the error to others. It could be my wife or my colleagues. Most challenging of all is owning the error in a public forum. But admitting mistakes is a key defining attribute of a leader. Owning the mistake accomplishes one critical thing. It builds trust, because it reinforces a fundamental characteristic of our humanity. We are all fallible.

I’ve been reading quite a bit about leadership recently, and like many others, I’m fascinated by leadership under great pressure, so I read about Navy SEALS. The stories of heroism under enemy fire inspire me. Extreme Ownership is one of those books. Unlike many others, it stands out because in the first chapter is admission of failure.

The author, Jocko Willink, is fearsome. Watch Continue reading "Ownership – A Defining Trait of a Leader"

Ownership – A Defining Trait of a Leader

One of the hardest things for me is to admit is when I’m wrong. It’s hard first to admit it to myself. But harder yet is to admit the error to others. It could be my wife or my colleagues. Most challenging of all is owning the error in a public forum. But admitting mistakes is a key defining attribute of a leader. Owning the mistake accomplishes one critical thing. It builds trust, because it reinforces a fundamental characteristic of our humanity. We are all fallible.

I’ve been reading quite a bit about leadership recently, and like many others, I’m fascinated by leadership under great pressure, so I read about Navy SEALS. The stories of heroism under enemy fire inspire me. Extreme Ownership is one of those books. Unlike many others, it stands out because in the first chapter is admission of failure.

The author, Jocko Willink, is fearsome. Watch Continue reading "Ownership – A Defining Trait of a Leader"

Should You Consider Emotional Intelligence When Hiring Your Startup’s Team?

How important is hiring for emotional intelligence? EQ or EI was introduced in 1964 by Michael Beldoch and popularized by Daniel Goleman in 1995. I hear EQ uttered in nearly every job interview and evaluations, and assumed that high EQ correlated to higher job performance. But I read two articles recently that changed my perception of emotional intelligence.

Professor Adam Grant wrote Emotional Intelligence is Overrated in 2010. Professor Grant teaches at Wharton. He worked with a CEO who asserted the validity of emotional intelligence as a predictor of performance. After two tests within the sales organization across several hundred people, the data revealed that cognitive ability predicted workplace performance in that company five times better than emotional intelligence. Is this broadly true?

A paper published in 2010 called Emotional intelligence: An integrative meta-analysis and cascading model accumulated the largest data set on emotional intelligence until that point.

The paper Continue reading "Should You Consider Emotional Intelligence When Hiring Your Startup’s Team?"

The Challenges of the Platform Go To Market

One of the most difficult go-to-market strategies for startups is platform. Platform go to markets mean selling software that can do many things, depending on the customer need. Selling a platform is challenging for five reasons.

First, most customers buy software to solve a particular and immediate problem. When pitching a platform, the potential buyer has to imagine what the platform can do for them. On the other hand, point solutions present a more concrete alternative of what is, rather than what could be.

Second, most platforms don’t solve a problem out of the box, so the buyer won’t receive the benefit immediately. Configuration, customization, integration require engineering time and budget. In contrast, point solutions are ready to go.

Third, broad platforms can complicate the sales process. The broader the platform, the more likely other departments seek a voice in the decision. Instead of a one-party decision, now the purchasing Continue reading "The Challenges of the Platform Go To Market"

The Theory and Data Underpinning Sales Commission Plans

Every startup’s sales commission plan is different. But it’s key to understand the theory and the benchmark data that governs the creation of sales commission plans to create a good one for your business.

Before we begin, let’s define a few terms. Sales compensation is communicated in OTE, On Target Earnings. OTE has two parts: salary/draw and commission. Salary is the annual amount paid to the employee irrespective of how much business he/she closes. Commission is the percentage of bookings awarded to the account executive in reward of the customers they close, adjusted by some multiplier. When you say OTE, you imply 100% quota attainment and the multiplier is one. In summary, OTE earnings is the amount of money the account executive will be paid if the AE attains the quota exactly.

The chart above demonstrates three different theoretical sales commission plans. The x-axis is quota attainment – the percentage Continue reading "The Theory and Data Underpinning Sales Commission Plans"

Hiring for a Discipline You Know Little About

Your startup is growing. You suspect you have initial product market fit. Time to hire the first head of each department. Sales, marketing, customer success, engineering, product management. Some founders might have experience or exposure into one of these teams. But rarely do they understand every one well enough to hire the right department chief. How should you do it? I’ve observed three successful strategies.

First, do the job yourself. Great managers manage themselves out of a job. By doing the work yourself first, you’ll know exactly what the role entails and what questions to ask. You’ll have the experience to judge whether a candidate can outperform you in that role. This is a common strategy for sales. The founders confirm product market fit with the first 10-20 sales and then hire an expert to scale the team and polish the process.

Second, enlist experts from your network and your Continue reading "Hiring for a Discipline You Know Little About"