When you pass from MVP to PMF, you undoubtedly realize that it's time to scale your Sales team. But more and more questions are arising while you are getting closer to the inevitable. Now you, fortunately, have a couple of SDRs, and AE or probably do all for yourself. So what's next? Another couple of SDRs? VP of Sales? At least someone who could help you clear the rubble?
Here at Palladium, we concentrate on marketing and your company's success and wellness. And after marketing, there is next no less important stage - sales. So how should you organize your sales in a way which allows you to scale 3X faster and spend less money on recruiting?
When should you scale up your sales team?
What were your first sales? Who closed them? Ideally, it was you. Because giving first deals to folks close is not an option. To design a process and find an approach for the team, you must sell at least 10-20 first clients by yourself.
But then you started to generate a certain amount of deals every month. You have your first hires to the Sales team. And your numbers still sway above and below your monthly goal due to a large deal getting delayed. But generally, you now reached $5M in ARR, and know that only a small percent of your market is covered, and there are still lots of deals to close.
Your inbound marketing finally started to bring customers, and you have referrals from clients. But as a founder, you still try to find other ways to fill the pipeline and increase your lead amount. Your calendar is packed with meetings and phone calls, and you have some stuff to send to that guy from the company you talked to yesterday.
So this is exactly the time when you can't handle it on your own and need some fairy help to make your sales process sustainable and scalable.
Do you need a VP of Sales first?
Who are you going to hire first? VP of Sales? No! Do not make this mistake. Hiring a VP of Sales where there is no Sales team formed? What is he supposed to do with all that? Speaking of good ones, VP of Sales costs big money, and they bring a huge sense when you add them to the already formed team, which has some process and approach formed. So here VP of Sales could unleash his potential and organize the team better, change your strategy, outline the budget, and set the goals. But hiring VP first… who will sell then? As you need help exactly with selling.
There is a great foundation for future team scaling, so always try to start with those four.
Understanding the infrastructure, you are building
Opportunity to scale your Sales team beyond any point of your growth, being a start-up, grow up or scale up, is the vital option to save your budget and time and not to lose customers for a long period of time because you ran out of people who can take them and close. What could help you not to lose from the very beginning? Here you go!
Build your team in a phased approach. If your current work amount could be covered for 2 SDRs, there is no need at all to hire the third one. If your product is simple so far and you have enough resources for self-onboarding, don't hire an Onboarding Specialist just to be. Even if your budget allows you to form the whole team at once, there is no sense in that. What are you going to pay people who do not even have responsibilities?
Organize your team into PODs, where each team has a specialization. Scale your revenue while scaling PODs, as they are metric-driven. Scaling with PODs is revenue predictable, good for optimization, and effective. There will be much more details. Just read for another 2 minutes:)
Clearly define roles for every member in the POD: AE, SDR, CSM, MDR… Everyone should know what his responsibilities are, what metrics he is chargeable for and what outcomes other members need from him.
Define how Sales will interact with other parts of the company. When Sales should provide customers' feedback for the development team, how Sales will cooperate with Marketing to drive more prospects, and how Sales and Customer Success could work together.
Having your Sales organization structured and wisely connected with other departments gives you the flexibility to scale fast and without waste of any resources.
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How to make your sales org scalable
When your company is below $3M in ARR, you will combine outbound and inbound as lead sources, and while inbound leads still need a qualification, there is no prospecting stage. When you start running out of leads, you need SDRs to develop a campaign and prospect to the customers to bring something your AE could work with. At the same time, your CSM will struggle a lot under a huge heap of onboarding and product usage requests.
Getting closer to ≈$3M in ARR, your Sales organization will specialize in onboarding vs. customer success. To continue to provide needed support for customers, manage their payments, and answer questions, you must separate customer success from onboarding activities and hire a new specialist responsible for onboarding new clients. This will help your CSM unload from the rubble and concentrate on helping customers to get the most value from the product.
$5M in ARR is when you should focus on bigger deals or vertical markets. Otherwise, it's hard to scale. Your current AE is still packed with small/medium size leads and doesn't have enough time to pursue bigger clients as they require much more touch points before decision-making. It's time to hire a new AE and concentrate him only on big clients. Here where you finally need a VP of Sales, as your team is fully formed, and someone should debug processes and monitor performance.
How to use POD for team org
Why do PODs work well, and why should you use them? PODs are an excellent solution if speaking about teamwork, accelerated learning, and mutual accountability. People inside the POD are closely connected with each other, and the success of one depends on the success of others, this help to keep the high morale and motivation inside.
How does POD work? Take a glance at the example below. There is a 2x2 POD, where MDR is concentrated on bringing inbound leads, and SDR is focused on prospecting and outbound lead generation. All set meetings are divided between 2 AEs, who, let's say, handle 60 meetings every month (30 every) and might close 10 deals.
How to model your POD, and who do you need inside? First of all, your POD should be economically efficient. If your SDR brings 30 SQLs monthly, 4 of which AE converts into customers, you have a certain amount of revenue. Imagine that your SDR's efficiency dropped one day, and he started to bring 10 SQLs instead of 30. Sales also dropped, and so did the revenue per POD. Today we know that for a POD to be economically viable, the annual spending on this POD should not exceed 40% of annual revenue. Let's say your goal is to generate $1M in ARR, you should not exceed spending $400.000 in compensation (this includes salary and commissions).
Different POD models
Here are 4 examples of commonly used PODs. There is no one standard rule on how your PODs should be organized. It strongly depends on your need, target market, and the channels you work with.
🟣 Standard POD - used for different channels or vertical markets approach
🟣 Inbound POD - used with inbound channels of lead generation, often with low ACV of up to $12K
🟣 Outbound POD - used with an outbound approach, often with a high ACV of $12-50K
🟣 Target POD - used for large hand-picked deals, often along with ABM marketing approach to close $50-250K ACV deals with a dedicated team.
You can see that there are several POD varieties, and each is suitable for a certain deal size. So to figure out what POD you have to create, first, you need to set up an ACV goal and determine channels for lead generation.
Scaling Revenue by Scaling PODs
As your revenue grows, your POD will start to multiply and scale. Each POD is responsible for a dedicated revenue flow, so to stabilize your revenue growth, you should set up new PODs.
Let's say one POD brings you $20K MRR. So to have $60K in MRR, you need 3 fully ramped PODs.
And some nuggets of wisdom:
⚡ Make sure you know how long it takes to ramp a POD to achieve 80% (in days).
⚡ Use the right leaders for your PODs. Not just AEs need to be the POD leader. CSMs and SDRs can also be used to start a new POD if they have leadership potential/experience.
⚡ Involve POD members in hiring new team members and firing non-performing members.
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Use PODs to run sprints and identify target markets
Each POD will learn and develop in a particular area and then quickly switch to another field while you can see what markets which POD should cover depending on performance. This will allow each POD to train only on sprint's needed value proposition/cases and peculiarities. The sprints can vary in length, depending on what market or ACV a particular POD is focused on.
Scale your recruiting with POD
PODs also allow you to scale your recruiting and make hiring new members less time-consuming. Let's say you are about to launch a new POD. Should you hire all members from scratch? No, you can easily promote the top performers from the existing POD to a higher position in a new POD, and shuffle positions inside the existing POD to make new hiring as easy as possible.
If you have a great AE in your existing POD, promote him to the leader of a new POD. Promote your SDR to AE, and hire a new SDR, which is the easiest and fastest position to close.
💜 Bottom line
You've reached the end of our deep dive into sales PODs! Make sure you follow Palladium blog for similar insights! If you need a consultation about early Sales Team organization or Marketing, just let us know by clicking the “Book a call” button. Palladium is always here to level up your revenue, and we are truly happy to hear from you!
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