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10 Sales Leadership Lessons From 10 Years at HubSpot
How important is the seat you choose on the first day of school?
For me, that decision changed my life.
As a student at MIT back in 2005, I took a class on startups and sat next to an introverted student named Dharmesh Shah. A friendship blossomed into a business relationship and upon graduation Dharmesh and his co-founder, Brian Halligan, hired me as their fourth employee and first salesperson for their company HubSpot. It was one of the most difficult journeys of my life. Here are the ten sales leadership lessons I took away from the experience.
#1: Today’s empowered buyers dictate the sales process, not salespeople. Develop the buyer journey first and then design a sales process that supports it.
Circle the salespeople below.
You probably circled the three photos on the left. Isn’t that sad? Centuries ago this field called “sales” was created to venture into the marketplace and represent our companies with potential buyers. And yet today if you Google the word “salesperson”, the photos on the left representing money hungry, sleazy, manipulative individuals are far more abundant than the photos of intelligent, helpful, prescriptive individuals on the right.
However, is this the era where this all changes? Are we as buyers finally empowered enough by the information access of the Internet to no longer need sales? Does sales either need to transform or die?
I think so.
We need to transform sales. A key building block to this transformation is the way in which we set up our sales process. The mistake many companies make is centering the sales process around seller actions. I made this mistake in the early days of HubSpot. For example, a common sales process is:
When salespeople begin executing this self-serving sales process, they focus more energy on “checking the boxes” their sales manager laid out for them rather than listening to the buyer and supporting the buyer through their process. The seller and buyer feel misaligned. Furthermore, the process delivers minimal value to the buyer. Buyers don’t want to be prospected, qualified, demo’d, or closed. These steps add zero value to the buyer. If the salesperson cannot add value beyond the information the buyer can find on their own, the buyer has no reason to engage with the salesperson at all.
Modern sales teams avoid this issue by starting with the Buyer’s Journey. To define the Buyer’s Journey, think about how buyers become aware of, evaluate, and purchase your service. An example framework is:
Then, build your sales process by asking yourself what your salespeople can be doing at the awareness, consideration, and decision stages to support the buyer. For example:
1. Identify “strangers” who may have goals or challenges they can help with. These “strangers” become “leads”
2. Connect with these “leads” to help them decide whether they should prioritize the goal or challenge. If the buyer decides to prioritize the goal or challenge, these “leads” become “qualified leads”.
3. Explore the goals or challenges with these “qualified leads” to assess whether the salesperson’s offering is a good fit for the qualified leads’ context. If the salesperson’s offering is a good fit for the qualified leads’ context, these “qualified leads” become “opportunities”.
4. Advise these “opportunities” on the ways in which their offering is uniquely positioned to address the buyer’s context. If the buyer agrees the salesperson’s offering is best for their context, these “opportunities” become “customers”.
I invested a lot of time last winter creating a free sales training course that outlines many of these concepts in detail.
#2: The most important sales training occurs when salespeople walk in their buyer’s shoes.
This modern form of selling requires the salesperson to truly understand what it’s like to be in their buyer’s shoes. What do their buyers do all day? What is easy about the job? What is hard? What causes stress? What do individuals in this role like to do? What do their bosses want them to do? How is success measured?
Once the salesperson truly understands the day-to-day job of the buyer, the salesperson can then effectively relate to the buyer. The salesperson can connect with the buyer, earn the buyer’s trust, and appreciate the buyer’s unique perspectives. The salesperson can understand where the buyer wants to go because the sales person has been at both the starting gate and the finish line. The salesperson can advise the buyer. The salesperson can help the buyer.
Providing our salespeople with an in-depth understanding of our buyers’ day-to-day existence became a key goal of sales training at HubSpot. In the first few years of HubSpot, we targeted marketing professionals. Therefore, the sales training goal was to teach our new sales hires what it was like to be a marketer. New sales hires did not spend their first few weeks in sales training, memorizing scripts, and discussing objections. Instead, new sales hires spent their first few weeks at HubSpot developing their own website, writing their own blog, and creating their own social media presence. By the completion of training, our new sales hires would often rank at the top of Google search results for dozens of keywords. They built social media followings of hundreds of people for their websites. They published blog articles, set up landing pages, ran A/B tests, segmented leads, created email nurturing campaigns, and analyzed the conversion of website visitors to leads to customers, all using the HubSpot software.
Sales hires felt the pain of a marketer because they lived through it.
By the time new hires made their first prospecting calls, they knew more about inbound marketing, blogging, and social media than some of the marketers on whom they were calling. They could genuinely understand them. They could genuinely advise them. They could genuinely help them.
I discuss this training tactic in Chapter 6 of The Sales Acceleration Formula: Using Data, Technology, and Inbound Selling To Go From $0 to $100 Million.
#3: Missed revenue targets are more often a symptom of bad planning than bad execution.
Here is a common conversation I have with early stage founders and sales leaders.
[Me] “Let’s look ahead two quarters from today. How much revenue are you planning to do?”
[Sales Leader] “$2.4 million”
[Me] “How did you come up with that number?”
[Sales Leader] “We increased revenue by 25% each quarter.”
[Me] “How many salespeople will you need to hit that target?”
[Sales Leader] “I am not sure”
[Me] “What will you need to invest in demand generation to hit that target?”
[Sales Leader] “I am not sure”
As executives, we have a great sense of the top-line revenue goals we aspire to. However, we rarely do the proper sales and marketing bottoms up planning to support these goals. I made this mistake for the first few years at HubSpot and quickly learned that planning for next year’s revenue had to start in the prior summer.
There are five “silent killers” in the bottoms up planning process that can be the difference between goal attainment or an off quarter.
1. Salesperson ramp
2. Salesperson attrition
3. Demand generation
4. Manager-to-salesperson ratio
5. Seasonality of revenue acquisition.
I have attached a simple bottoms up sales and marketing template that accounts for these factors and can help with the planning process.
I also developed a Harvard Business School case on the subject.
#4: There is no universal criteria for top salespeople. The ideal sales hiring criteria is unique to your business and must be engineered prior to scaling.
“Mark, what do you look for in a sales hire?”
So many Q&A sessions at conferences have started with this question. It is a dangerous question.
My ideal hiring criteria probably won’t work for you. Many salespeople that failed at HubSpot left and flourished elsewhere. Some top performers at HubSpot left and struggled in their next sales role. Success or failure is largely dictated by your sales context and the salesperson’s fit for that context. Who do you sell to? How complicated is the process? How technical is the service offering? Is the sale over the phone, in person, or through a partner? How mature is the product and the industry? The answers to these questions influence your ideal sales hiring criteria.
Despite the criteria varying from company to company, there is a standard process to engineer your sales hiring formula. With your unique sales context in mind, define the 5 to 10 criteria you should look for in a sales hire. Clearly define each criteria. Set up a numeric scale to score candidates against each criteria and outline what a low, medium, or high score may sound like. Score each candidate against the model. Most importantly, take time each quarter to reflect on the success of your recent hires. Ask yourself why each person is succeeding or struggling. Then refer to their interview score-sheets to reflect whether you adequately assessed the hire in this area. Iterate the model based on your learnings.
Here is an example sales candidate assessment sheet to start with.
#5: Entice prospects with education rather than product demos.
“Hi Mark. This is John from Acme Inc. We help sales leaders like you gain visibility into your sales pipeline and improve the predictability of your revenue production. I would love to show you a demonstration of our product. Would you be available Tuesday at noon?”
My voicemail is cluttered with messages like these on a daily basis. What I dislike most about the message is the offer is completely mis-aligned with my stage in the buying journey. I am likely at the Awareness stage, simply trying to understand how to frame the problem that I have. So why would I want to see a product demo?
I am more interested in understanding the best practices to pursue my goal or address my challenge. I am interested in the research, proven tactics, and peer stories related to this problem. An educational ebook, thought leadership webinar, or even a free consultation would be far more appealing to me than a product demo.
An educational offer not only yields a higher conversion rate to a conversation. The approach also positions the salesperson more favorably to help the buyer. Before salespeople pitch a product, they need to understand if they can even help the buyer and, if so, how. Only then is the offer for a product demo appropriate.
#6: Sales coaching is the most important lever to drive sales productivity. Practice metrics-driven sales coaching.
Developing salespeople via front line sales managers is the biggest driver of revenue growth. Below is a cadence I used to hold the entire sales organization accountable to a culture of effective coaching.
The key discussion in this cadence occurs between the sales manager and salesperson on the first day of each month. By empowering salespeople in this discussion, they are bought in to the observations and gain the skills to self-diagnose and self-correct. Start by asking the salesperson to qualitatively assess their prior month. What did they do well? What could they have improved on?
Next, present last month’s performance metrics. Show how the salesperson ranked against their peers on each stage of the funnel. Show how the salesperson’s funnel activity compared to their own prior month’s performance. Ask the salesperson why they may be at the top of the chart, or the bottom of the chart.
Finally, given the qualitative and quantitative assessments, ask the salesperson which skill they would like to develop in the upcoming month and how the manager can help them with this development. Schedule the coaching sessions in the calendar during that meeting. As a result, sales managers can feel great comfort that they have identified the key development areas, the salespeople are bought into the development, and the time necessary to execute the coaching is already allocated.
Here is an example template illustrating the chart formats useful for this coaching cadence. I have been teaching a session using this template in my new course at Harvard Business School, Entrepreneurial Sales and Marketing (full syllabus here).
#7: Issues with customer success are often solvable through the sales compensation plan.
The sales compensation plan is arguably the most effective tool for CEOs to drive strategic change through an organization. Few CEOs appreciate this. Often, they delegate the compensation plan to their VP of Sales who in turn implements the design used at his/her last company. Founders, CEOs, and sales executives should first consider the high-level strategic objectives of the organization and then explore whether the sales compensation plan can support them.
For example, let’s consider a strategic objective such as improving customer success. Early in our tenure at HubSpot, like many high growth organizations, we experienced rapid customer acquisition but began to see a degradation in customer success. At first, we looked to our customer success managers, thinking some were better than others at on-boarding customers. However, when we analyzed churn by customer success manager, there was little variation from person to person.
Next, we analyzed churn by salesperson. Significant variation among salespeople was discovered. As we looked closer, we realized our customer success issue was rooted in the types of customers our salespeople were pursuing and the expectations they were setting with these customers. We made a lot of changes to address the issue, such as implementing sales training and sales methodology enhancements. However, aligning sales compensation with customer success had the greatest impact.
Many compensation structures can be used to pursue this goal. I outline a few in this Harvard Business Review article, “The Right Way to Use Compensation”.
#8: Optimize demand generation requirements around a 40-hour work week rather than a pre-determined quota to drive sales productivity.
Without realizing it, executives engineer sales team productivity at levels lower than its full potential. Executives arbitrarily establish a quota target per salesperson, often derived from a peer company. Then, they calculate how much demand is necessary for the salesperson to achieve the quota, given historic conversion rates on leads or appointments. However, the demand generation per salesperson should not be based on achieving an arbitrary quota but instead on maximizing a 40-hour work week. This optimization is far more difficult to calculate but will yield the maximum potential of the team.
Here is a an example of how we uncovered this maximum productivity potential at HubSpot. Years into the venture, we kicked off a new sales team. The sales motion was different enough that we decided to isolate the team from the rest of the organization and use the opportunity to experiment with a completely different model. After a few quarters of experimentation with a small team, we solidified a predictable model and were ready to scale. Finance suggested the group increase revenue in the coming year by 5X and budgeted for a 5X sales headcount expansion.
I agreed to the 5X revenue and the expense budget. However, I informed Finance I was going to delay hiring. Instead, I would pour a larger portion of the budget into demand generation and challenge the existing salespeople to find creative ways to scale the revenue production and achieve the much higher aggregate targets.
The sales team loved the challenge. They were highly motivated to pull it off as I would proportionally increase their commission payments as they achieved the higher revenue targets. Finance loved the plan as well because the higher salesperson productivity yielded significant unit economic efficiency.
The team hit the 5X revenue expansion and we had to hire a fraction of the budgeted sales headcount to do so. Their revenue production was more than twice as large as observed in previous funnels at HubSpot. Hopefully this example inspires ideas to optimize for maximum sales productivity rather than corner your team into an arbitrary output.
#9: The greatest motivation factor is a formalized career growth plan.
Besides the commission plan, we used another important element of the sales compensation structure: a formalized career growth plan. Some salespeople want to become managers. Others want to start their own business one day. However, many salespeople have no desire to become managers or entrepreneurs; they just want to grow as individual contributors and hone their craft. I love these types of salespeople!
A common career goal for these salespeople involves the movement from inside sales to outside sales. However, in the first few years of HubSpot, we did not have any outside opportunities. We were purposely focused on the large, untapped SMB market, and felt the best way to reach our future customers was by focusing exclusively on building an inside sales team. I needed an alternative solution to provide a career track for our salespeople.
Most organizations relied on an annual review and traditional 2 to 4 percent increase in salary based on performance. That approach felt too subjective to me. The performance of a salesperson is so measurable, I felt I could come up with something more quantifiable and motivating.
We came up with the concept of promotional tiers. The chart below shows an example set of these tiers.
The first column in the chart illustrates the salesperson’s title at each level. The second column illustrates the base pay, variable pay, and additional equity earned at each level. The third column illustrates the criteria necessary to make it to the next level. For example, the entry-level sales title is “sales associate.” To get promoted to the senior sales associate, an entry-level salesperson needs to accumulate an install base of $60K in monthly recurring revenue (MRR), acquire an average of $5K new MRR per month, and sign up new customers with an average of six months paid up front. Once the salesperson’s performance meets these three criteria, she is promoted to senior sales associate. Her quota increases, but earnings per dollar closed increases as well, resulting in a higher commission rate and higher OTE. In addition, promoted salespeople receive an additional 10,000 stock options.
The promotion tiers were a powerful structure within the overall sales compensation model. Salespeople are competitive, financially motivated, and goal-oriented. They took these tiers seriously, always looking to advance to the next level. As a result, the promotion criteria represented another opportunity for us to align compensation with the desired behaviors we wanted from our salespeople.
The promotion tiers were also great for culture. We did not have to manage annual reviews and the often arbitrary compensation increases. The promotion tiers took the subjectivity and politics out of this process and empowered the salespeople to ascend as quickly as they could. Feedback was delivered on a weekly and monthly basis, and was not reliant on the annual review.
One important observation here is the fact that tenure was not a criteria for promotion. This strategy was very important to me. Many top performers achieved the promotion in as few as seven months. For others, it took over two years. I had no problem with that. Frankly, I never understood why tenure is a factor for promotion in so many sales organizations. Sales is such a measurable, meritocratic function that I simply left tenure out.
#10: Minimize friction in customer handoffs by pushing the cross-functional alignment as close to the front-line as possible.
Traditionally, organizations have structured themselves around the functions of their employees. There may be a section of the office for marketing, one for sales, one for customer success, and so on. While this approach is great for intra-functional discussion, the design creates a terrible customer experience. Information about the buyer is inefficiently passed between groups. Handoffs between these groups feel disjointed from the buyer’s perspective. Furthermore, during periods of under-performance, functions begin pointing fingers at one another. Sales claims lead quality has dropped. Marketing claims the sales team is not properly trained. Customer success claims sales is bringing on the wrong customers.
To offset these issues, organizations should structure themselves around the buyer, forming small cross-functional teams under a front-line manager. To further emphasize the intent, physically sit the teams together. As a result, they will form relationships and naturally optimize the experience around the buyer. The front-line manager can assist with alignment issues in real-time, rather than wait for the issue to be escalated up the chain to busy senior executives twice removed from the origination of the issue.
What’s Next for Me
I hope these sales leadership lessons inspire a few useful ideas at your organization.
As for me, I am sad to say my time at HubSpot has ended, at least as an operator. I have accepted a full-time faculty position teaching at Harvard Business School.
The inspiration for my move to teaching came from my experience at HubSpot and prior entrepreneurial ventures. As a naïve 22 year old entering the entrepreneur ecosystem decades ago, I was convinced that a company simply needed to build a great product and the rest would fall into place. I quickly learned how critical sales execution is to a startup’s success. Some would even argue it is the most critical function to execute on. Despite these observations, sales is rarely taught in school. Few institutions offer a single class, never mind a major. Furthermore, the best and brightest students do not consider sales as an attractive career.
Clearly there is a misalignment. My mission for the foreseeable future is to make a dent in this issue. Don’t be surprised if many of you hear from me to help.