The answer lies where growth meets Red Light, Green Light
We’re at ~$1 million in annual recurring revenue (ARR) and my investors keep pressuring me to hire a “senior sales leader.” How do I know if now is the right time?
Readers, beware: this advice is going to fly in the face of all venture capital (VC) guidance. (In fact, I spend most of the “Growth” chapter of my recent book, Founder vs Investor: The Honest Truth about Venture Capital from Startup to IPO, coauthored with Jerry Neumann, on all the problems that guidance will cause you if you listen to it. But read on, if you dare…)
It’s incredibly seductive when an investor suggests hiring a senior sales leader, or a senior anything leader. It means they think you’re ready to scale and don’t want you to waste any more time before you put someone else in charge of that very important function. But are you really ready for that kind of scale? At least 50 percent of executive searches will fail anyway. What happens if you don’t know what or how you’re selling, or which words to use to even talk about the product (which, believe me, is entirely possible and even most likely at the $1 million ARR stage)? Then your quest for a senior sales leader will almost certainly fail—and in spectacular fashion. If you don’t know the right words, that senior person won’t be able to provide them. (Senior leaders scale; they don’t invent. That’s the job of a founder.) Then you’ll get the blame, and your job (and company) will be in a more precarious position than before—not least because you lost nine months on searching, hiring, then firing this person. Okay, rant over.
I used to present a go-to-market slide in board meetings. It wasn’t a funnel, and it certainly wasn’t concerned with dividing up the credit for new customers between the marketing and sales teams. (A classic fight, which is really dumb and shouldn’t matter!) What I cared about was visualizing the steps that it took to acquire, retain, and expand a customer. I cared that a potential customer raised their hand, not if that hand raise was through a free-trial form or chat or over email or LinkedIn. There were maybe eight steps color-coded by status: at a certain point our ability to do prospecting might have been red, while our first demo might have been green, and the POC (proof-of-concept) phase was yellow.
Those colors were a measurement of our maturity in that area. When something was red, it meant that we were all-hands-on-deck, and the founders were figuring out our playbook. When changed from red to yellow, it meant we knew what we were doing. At least, we knew enough to start writing a playbook that someone could follow and to hire the first individual contributor. When an area was green, you’d best bet I already had a team running that playbook.
Here’s my point: only you, the founder, can figure out the playbook. I see so many founders who believe—often through VC cajoling, but sometimes because of their own ego—that they can hire someone to take over that function, whether that’s in sales or support, and those new hires eventually fail. It is a rare leader indeed who can actually figure it all out. But they exist; I’ve met them. They all become founders.
So how do you figure out if the time is right? Create your own traffic-light map. Distill whatever area you’re getting pressured on down to tactical steps, free from any sort of blame game. For example, if you’re being told it’s time to hire a Chief Marketing Office (CMO), write out the current product process. Are you able to write a compelling sentence or two that can get a prospect to raise her hand? Can you identify one thing that currently drives leads that you want to pour money into? Without these ingredients, the most talented and driven CMO in the world will fail and you will lose the better part of a year.
Next, stare at the map. If it’s all yellow and green, follow that investor advice and admit you waited too long. (You get bonus points for looking “coachable,” too!) If it’s red? Go talk to everyone whose money comprises that sexy ARR number and figure out how the hell you actually got them to pay you. Write that playbook. Then hire. Whatever you do, don’t conflate hiring a human with finding your savior—no matter how much the VCs wax ecstatic.
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