Just watched an amazing crash-course (under 1h in total) on Sales by Peter Levine and a16z - All Things Sales.

Here are my notes with screenshots from the series (all rights to the graphics belong to a16z). Enjoy!

Understanding and defining a Sales Channel

  • Channel types
    • Direct-to-Consumer
    • Channel Partner
    • OEM (Original Equipment Manufacturer)
      • They can have both:
        • DtC
        • CP

  • Having multiple touch-points to end-users (coming from different channels) might produce “Channel Conflict”

How Much to Spend on Marketing vs. Sales? (Sales Engagement)

  • When you start-up, pick where you are

Market Segmentation

Why Build a Sales Organization

Building a Sales Organization

  • Who do I hire
    • Initiation Phase:

  • Transition Phase:
    • The original sales people;
    • VP of Sales.
  • Execution Phase:

  • When do I hire?
    • 2-3 people at Initiation Phase.
    • Hire VP of Sales during the Transition phase.
    • Most of the rest should be hired after that initial Sales Team has figured out the Repeatable Sales Model, generating 3x their annual salaries.
  • How do I hire?
    • The initial Sales Team should be scrappy and without too many habits from corporate.
      • They need to be hungry for achievement (moving Big Rocks out of the way) and agile to sell everywhere and to everyone
    • At the Execution Phase people should have a corporate background to be able to operate in a bit more mechanical way
  • You should keep the original sales people at the Execution Phase of the original product and hopefully put them to open new markets or even start all-ver-again at the Initiation Phase on a new product
  • Promote the original people once you get to the Transition Phase and promote them again at the beginning of the Execution Phase

Setting the Sales Number

  • On it depends how much you will put into Engineering, Marketing, Sales etc.
  • On it depends the valuation of the company
  • Bottoms-up Forcasting

  • Top-down Forecasting

  • Growth on both should match up

Sales Quotas

  • Total Quota is
    • number-of-sales-reps * sales-rep-quota
  • Company Quota is:
    • TQ * 0.8
    • it accounts for people leaving and reps not meeting their SRQ
  • Even if the CQ is reasonable and met, the TQ shouldn’t be larger than +20% of TQ, because this would mean that no one from the sales reps will meet their SRQ and they will not make their commission and they will leave the company

The Coverage Matrix

  • Routes to market vs Customer Segments

Managing a Sales Organization: Forcasting

  • Forecasting Accuracy
    • Its about longterm investment
    • balancing growth and burn impossible without forcasting
    • Transparency
      • make people write down truthful information about sales
      • otherwise forecast will be inaccurate
    • pre-IPO, it is the most important factor

Managing a Sales Organization: Revenue Composition

  • On what value do you pay your sales force? Pay only on growth!
    • ARR
      • [√] new
      • [√] upgrade
      • [x] recurring

Compensation

  • 3-4x their compensation should be generated by the sales force
  • should be uncapped compensation plan
  • compensation shouldn’t go down above target quota is reached
  • example:

Pipeline

  • Predicting what you are going to do within a quota:

Measure Sales Force Productivity

  • At least 70% should make their annual quota
  • meeting company quota with smaller % of people meeting their quota is not OK

Simplify Sales Compensation

  • Better to have an imperfect & clear compensation plan is better than perfect & complex one

Takeaway for Technical Founders: How to think about Sales

  • Think about Sales early
  • Sales is 50% of the health of the company