Plan on at least a year and a half full time operation with zero sales if your target market is enterprise (Fortune 1000) business and you are just starting up your innovative technology product or service company. Zero sales does not mean that you proceed on your journey without sales people. On the contary, it is imperative that you have top sales talent (as well as marketing talent) on your management team if you are to give your start up its best shot. Consider how much has to be accomplished in preparation for sales revenue. For example, you will have test the sales potential for planned products to ensure that your revenue forecasts are sensible and attainable. Sales testing includes
- Obtaining permission from influential prospects to participate in product planning along with you
- Building a reliable sales model that includes a realistic estimate of the length of the sales cycle and, of most importance, a portrait of a best customer that will provide the bases for the qualifiers that your sales team will use to rank sales leads and determine where best to spend their time
- Gathering sales level intelligence (as opposed to market level intelligence) about your competitors, their customers and the public reputation for their products
- Building an initial sales funnel of qualified leads that will produce sales
As well, your sales talent will participate along with marketing and finance in the development of your business plan.
So how to compensate sales during this period of zero sales? The old adage, “you get what you pay for” holds true. Pay nothing and, more often than not, get nothing. A realistic business plan must include compensation for sales talent. Offering equity participation works, but only for sales personnel with the financial resources to weather your first year and a half period of zero sales. You might be fine restricting your recruiting to only sales people with the resources to go the distance, in exchange for an equity stake in your business and, then again, you may not.
I recommend planning on a sales staff budget of $75K – $95K for year one of your business. Of course any equity participation that you are willing to grant will sweeten the deal, so don’t neglect to include any equity that you can in your offer. Committing to a realistic sales staff budget will afford you the opportunity of hiring a sales manager (potentially a VP of sales) as a full time employee.
© IMB Enterprises, Inc. & Ira Michael Blonder, 2011 All Rights Reserved