When Is It Safe to Hire?
It's one of the classic Catch-22's of entrepreneurship: Business owners are often afraid to hire a salesperson until they're sure they're bringing in enough revenue to support the extra salary--but how can they reach that threshold without hiring a salesperson? Two years ago, Stan Kania found himself in this bind. Kania is the CEO of Software Link, an accounting software reseller in Alpharetta, Georgia. At the time, his company had $2 million in sales. "I was the only person selling," says Kania, "and the problem of running the business and trying to sell at the same time was overwhelming."
Although he was on the verge of exhaustion, Kania wanted to be sure the timing was absolutely right before Software Link brought its first salesperson on staff. To Kania, that meant generating enough sales leads for a new person to follow up on. He says he was getting close to that point. Then he got an offer he couldn't refuse. Sage Software, the corporation that makes the applications that Kania sells, proposed to give him $10,000 toward hiring and training a field salesperson. The money could be used on anything from putting candidates through a battery of personality tests to subsidizing salary in the early months to providing the new hire with coaching services up to a year after he or she is sent into the field. The only condition? Kania had to fill the job within 100 days.
Incentive programs are common in the software industry, where, instead of relying on a direct sales force, corporations like Sage often turn to small resellers to pitch their applications to a vast market of customers. Incentives as extensive and generous as Sage's are rare, however. For the past three years, the company (formerly known as Best Software) has invested $1 million a year to provide 100 resellers with $10,000 each to hire a salesperson. The initiative, which Sage calls the 100/100 program, provides interesting insights into why entrepreneurs delay recruiting salespeople--sometimes until their companies falter--and what mistakes businesses make in the hiring process.
The program came into being after Sage discovered, in a survey of its resellers, that an alarming number of these businesses counted the owner as the one and only active salesperson. At Sage, which develops a smorgasbord of business software, executives debated how to persuade more resellers to put, in the words of Taylor Macdonald, who oversees the reseller network for Sage, "more feet on the street." The problem, as always, was convincing them that the potential reward outweighed the risk. "Our partners are always hesitant to hire," Macdonald says. "There are legions of stories of hiring a new salesperson and after 60 to 90 days it doesn't work out and then they're out a whole lot of time and money. Then they become gun-shy." The 100/100 program was designed to overcome these fears.
Brant Wadsworth, the owner of Digitek, a Phoenix-based software reseller with $2 million in revenue, is typical of the CEOs Sage wanted to reach. "I had hired salespeople before, but the process to get them up to speed was difficult, and they didn't work out," he says. "The hardest thing about finding good salespeople is that they're all professional actors. Every salesperson is giving you their best pitch when you're interviewing."
Using the $10,000 that Sage provided, Wadsworth decided to try again. To avoid making another bad hire, he engaged Opus Productivity, a personality profiling company based in Laguna Hills, California. Sage had recommended Opus to its resellers, and had let Opus compile data on the top performers at Sage's top 25 resellers around the country to create a profile of the most successful software salespeople. (What defines success? Sage has come to value the people who are most adept at landing new accounts more highly than the top performers by revenue. This distinction reflects Sage's self-interest, because software makers earn less money from resellers' existing clients than from new accounts.)
After the initial round of interviews and tests, Wadsworth created a short list of six candidates. Then managers at both Sage and Opus interviewed Wadsworth's selections and gave him their feedback. Sage was happy to have a role, Macdonald says, to guard against resellers hiring "their brother-in-law or a buddy from church."
That was two years ago. Wadsworth's hire quickly became the company's top earner and was part of a three-person sales team that landed 31 new accounts in a year. "It was awesome," Wadsworth says. "She was my very first long-term sales hire ever."
Not every company that participates in the 100/100 program enjoys such immediate results, of course. In 2005, Sean Mohan, the founder and CEO of Strategic Sales Systems, a St. Louis reseller with $1.5 million in sales, took Sage up on its offer. He dutifully put candidates through personality testing, but when a low score seemed to discredit his favorite prospect, he decided to go with his gut.
Mohan thought the person he hired, though inexperienced, had great potential. But soon after she came to work, Mohan realized he'd screwed up. As the personality tests had suggested, the candidate's natural exuberance did not make up for a lack of aggressiveness and experience. "Some of the weaknesses we identified in the screening process turned out to be the problem," Mohan admits. After several unhappy months, the salesperson left.
Last year, Sage allowed a repentant Mohan to try again--so long as he was willing to give greater weight to the personality scores. The second hire was productive after only three months on the job, and by his fifth month, he had brought in three customers the company wouldn't have gotten otherwise for sales totaling about $90,000. Despite the happy ending, Mohan's fear of sales hiring persists. "Any time you hire a salesperson," he says, "there's a lot of risk. Until they start selling, you don't know what you're going to get out of it."
Sage, meanwhile, continues to try to get better at predicting who will succeed in the ultracompetitive software industry. The company is quick to point out that the turnover rate for salespeople sponsored by the 100/100 program has been very good. After one year, 78 percent of the salespeople hired as part of the first class were still employed with the resellers who hired them; the two-year figure was 65 percent. For typical sales hires, the software maker estimates, Sage's resellers retain only 32 percent after one year and 15 percent after two.
Despite these enviable statistics, Sage has spent a lot of energy looking at the small group of salespeople who didn't last. Low test scores are common. Feuding between the new salesperson and the owner of the business is another recurring theme. To figure out the root causes of these clashes, Sage put some of the software entrepreneurs through the same personality test as the sales candidates.
The findings revealed that, as a group, the business owners were more introverted and patient than the top salespeople. The best salespeople, meanwhile, were impatient and aggressive, and needed a lot of affirmation and encouragement. Business owners didn't see the need to celebrate every small step on the way to making a sale, which is exactly what the salespeople craved.
As a result of that discovery, Sage has begun to offer training to business owners on how they can become fair and supportive sales managers. The company also has beefed up training for the new recruits. Soon after they are hired, rookie salespeople are whisked away to an intense, weeklong boot camp. The sessions combine various selling exercises, including question-and-answer forums with real customers and what Macdonald calls "the dreaded role-playing," wherein recruits are videotaped making sales pitches and then critiqued (read: roasted) by their classmates and instructors.
Back at home, new salespeople are shadowed for up to a year by coaches who engage them in regular conference calls and Web seminars, providing them with encouragement, helpful feedback, and an outlet to vent whatever frustrations they may have with their new job or their new boss. The support provided in the early months, some resellers say, can be more valuable than the $10,000 subsidy.
That was Stan Kania's experience. In a twist Sage may not have anticipated, Kania used his $10,000 to poach a young salesperson named Dan Gimbert from Sage's nearby software support center. The 27-year-old rep was new to field sales but he had valuable experience at inside sales. "It took him 90 days to understand the process, and he was somewhat discouraged he hadn't made a sale yet," Kania recalls.
With the help of his coach and with Kania's feedback, Gimbert landed his first sale in his fourth month of employment. "Then it was one after another," Kania says. With average sales of $30,000 per account, Gimbert contributed heavily to Software Link's sales growth that year, which increased the company's top line by $1 million. Not bad for the very first salesperson Kania ever hired.