The 9 Worst Sales Mistakes Founders Should Avoid
“You are going to fire your first sales manager!” — A lesson too many founders learn the hard way.
We recently hosted the Point Nine Founders Summit, featuring several panels and presentations from founders, CFOs, COOs, and sales execs on building early sales teams and hiring your first successful sales leaders. We’ve compiled a few learnings from the event here to help other founders avoid costly and often catastrophic mistakes.
Inevitably, many of these lessons will be ignored and sadly need to be learned the hard way… by making them. You may have even already made some of these mistakes (hopefully, you’ve recovered), and as you read, you’re already nodding along.
At Point Nine, we aspire to continuously share what we learn with our community and the extended startup ecosystem. One key lesson we’ve learned from the best founders we’ve worked with is that they don’t need to learn the hard way by risking their businesses and employees. Instead, they seek advice from those who have been there before. So let’s dive into what those experienced founders have to share.
The 9 Worst Sales Mistakes Founders Should Avoid
- The Founder isn’t willing to be the first sales person
- The Founder stops selling too soon
- Hiring a Sales Leader too early
- Trying to figure it all out yourself without a sherpa-guide
- Listening to Late-Stage Advice for Early-Stage Companies
- Outsourcing the search for product market fit
- Misjudging the strength of product market fit
- Poorly Set Goals ruining the commercial organization
- Trying to reinvent sales/process/org/compensation
Bonus — Trying to save money on sales talent
1. The Founder isn’t willing to be the first salesperson
Many of the best founders we work with don’t have a sales background and are either product or engineering focused. My favorite joke when I meet a brilliant founder is to ask them if they know there’s an easier path to becoming an Account Executive than founding a company.
Jokes aside, this is listed as number 1 because we’ve yet to see a successful B2B SaaS company where one of the founders wasn’t the first person doing sales. It can be frustrating for some founders who don’t necessarily like sales or to whom it doesn’t come naturally, but it’s almost always necessary. Sales is hard, especially in the early stages of a startup. So to be bold enough to found a company and then have to build sales skills in the face of brutal rejection is a courageous endeavor. But the truth is, it’s the only way forward, and neglecting this point is doing so at your own peril. It will lead to making even more of the mistakes listed below.
Building some level of repeatability in closing at least a handful of deals is the fuel that drives the entire business forward. It helps keep the product team focused on customer feedback and providing value in exchange for revenue. If this doesn’t happen, the company is at risk. So, ensuring the founder(s) have a finger on the pulse of product-market fit is key to growing revenue, and it also helps make it clear who to hire next and with which sales goals/targets.
2. The Founder stops selling too soon
Sorry, I didn’t want to be the one to tell you, but CEOs never stop selling. The good news is that as you begin to build up a sales organization, you can start to phase out of actively selling… a bit. Ultimately, as the founder, you are responsible for every department’s success. If things start to fall apart and revenue drops, who’s to blame? Sure, you can blame the sales organization, but what good does that do? It’s the founder’s responsibility to build the business, and that includes ensuring continued revenue growth.
“I stepped away too soon, and revenue collapsed,” were the exact words I heard from an incredible founder who avoided the first mistake but not the second. Yes, sales can be soul-sucking. I’ve been selling for 20 years, and sometimes it still kills me. You founded a startup to lead teams, grow your business, and embark on an extreme and hopefully glorious journey we all dream of. But the fact is, if you don’t stay close to the sales team and continue to be involved in revenue growth, you’re taking on a lot of risk. When revenue and sales start to slip, it can happen very fast, and you won’t know why it’s failing if you’re not involved.
In the early days, you will be managing full sales cycles. But as the team grows, you can hand over certain aspects of selling to individual contributors. There is a sequence of recommended steps found HERE that, if followed correctly, can drastically reduce risk and help ensure a strong foundation on which to build. You can delegate more and more to new team members, but as the CEO, you will continue to be extremely valuable in complex, important, and strategic deals. Account Executives leverage CEOs to close deals, and embracing this aspect of the job allows you to stay close to the team, the customers, and keep a close eye on your product-market fit evolution.
3. Hiring a Sales Leader Too Early
Remember that first quote at the top of the post: “You are going to fire your first sales manager.” Well, typing that made me sick! But I’ve heard several founders say it recently, and each time I had to pause. It’s such a sad quote, and it doesn’t bode well for anyone involved. How can we all avoid firing our first sales manager?
One way is to get the timing right. Despite our collective warnings, many founders think they should jump straight to hiring a VP Sales or even a CRO the second it looks like they have some product-market fit.
Our take: Don’t hire a VP Sales until you have ramped up successful Account Executives.
Any decent VP Sales would never want to be your first sales hire. The first sales hire needs to do all of the selling, build the playbook, and (probably) act as a Sales Development Representative doing cold outbound prospecting. A true VP Sales doesn’t have to take all the risk of figuring all that out. Yes, they will refine it once the engine is running, but they don’t need to stand up the entire sales org from scratch without any proof that it will scale.
A true VP Sales is looking for proof that they can successfully scale a sales org and revenue. If you hire a VP Sales as the first sales hire, you will then need them to hire Account Executives. And then you will have someone new in the organization who hasn’t been selling trying to figure out how to train Account Executives. This is a death spiral.
Some founders have gone through this and know exactly how this goes. Some first-time founders will heed this hard-learned wisdom. Others think this isn’t going to happen to them. Which are you?
4. Trying to Figure It All Out Yourself Without a Sherpa-Guide
Okay, so you’re a technical or product founder. You’ve never sold before, and you’ve certainly never hired an Account Executive or built a sales team. That makes sense and is of course quite common. It’s also the profile of some of the most successful SaaS founders.
So, will you “figure out sales on your own” or choose someone to guide you through this uncertain path ahead? Would you climb Everest without a Sherpa?
Often, founders read a book or a few posts and wonder, “How hard can sales actually be?” You jump in, speak to a few customers, and boom — maybe your first sale happens! Usually, founders with grit (and some decent product-market fit) can make a few sales, but then what? How does this scale beyond the founder?
The best-performing startups led by technical or product founders also have investors or advisors who guide them through the early days (and often later years) of their journey.
Investors can be hit or miss when it comes to actual operational advice, so if you expect guidance from an investor, please make sure they have relevant operational experience AND they have the time to commit to helping you before you begin relying on them for guidance.
If you don’t have an investor who can help, find someone you trust that will collaborate with you. I use the word “collaborate” because every startup is a bit different, and every startup evolves. This means there needs to be regular engagement from the advisor. Also, the advisor should be able to give pragmatic and tactical advice based on (ideally a lot of) similar experiences, in conjunction with the data points and feedback from your sales efforts. There is a lot of hypothesis testing and experimentation in sales, and all of that needs to be factored into any guidance over a period of time.
You may also want an advisor for the early phase and an advisor for later stages. You can pay advisors hourly, with retainers, and also with equity. Some will work an hour or two a week, and some will be embedded on the team for several days a week. Many advisors are flexible in the way they work, and you need to find one who will help you with what you need right at this moment, as well as help on the journey for at least a few months or longer.
I often see X-CROs of (insert any spectacular success story company) advising seed-stage startups, and they have never actually been through that phase of a startup, or they haven’t worked at an early-stage startup for 20 years. If they aren’t involved in interviewing, distilling down, and setting up the processes for the Account Executives, and setting up their compensation/goals, as well as meeting with the first Account Executives regularly, then they aren’t adding as much value as you need. Get someone who will do these things. If they aren’t willing to help craft cold outbound emails alongside your reps, then that’s a good test to know if they are truly pragmatic.
5. Listening to Late-Stage Advice for Early-Stage Companies
Let’s start by clarifying that there are many late-stage investors that know how to work with early-stage startups and would likely echo everything in this post. BUT as a general rule of thumb, investors are often looking to match patterns. This makes sense and is extremely helpful… until it’s not.
The worst advice I see late-stage investors continue to push is hiring a VP of Sales or even a CRO as the first sales hire. (Also see above with a lot of these X-CRO advisors coming via later stage investor intros.)
Investors see the pattern of their best-performing startups at $50m in revenue having a senior VP Sales or CRO, so they push this down to early-stage startups. The pattern matching makes sense, and yes, there is a strong correlation between success and having seasoned commercial leaders at a certain stage of the business. That said, you shouldn’t ignore the sequencing of steps you need to get there (yes, another shameless plug to that post!) and the foundation and proof that need to be in place before you can recruit a great sales leader.
6. Outsourcing the Search for Product-Market Fit
This is related to the mistake of founders not selling or stepping away too early, but here applied to the continuous process of hitting/strengthening product-market fit vs. a binary decision about stepping away from sales. Products evolve, and it takes prolonged focus and attention to the value being provided to your often-expanding Ideal Customer Profile (ICP) and ultimately the Total Addressable Market to build a successful company.
I’ve seen founders who blame the sales team for not selling the product when the company didn’t yet have reasonably strong product-market fit. Who’s to blame? Does it matter? The company needs to get back to searching for or strengthening product-market fit, and without founders involved in that search, talking to customers, and working alongside sales to learn from the market, it becomes a guessing game at best.
Founders trusting someone else to do this is compounding the risk of failure. If product-market fit is lost or weakens over time and the founders aren’t there to steer it back on track, then the startup will fail. Strengthening product-market fit is the number one job of the founder.
7. Misjudging the strength of product market fit
This is a tough one to measure, and as mentioned above the strength of product market fit can evolve over time. BUT the best way to judge product-market fit is the number of happy paying customers. This isn’t a feeling, but the fact that businesses give the startup money in exchange for the value its product creates. In the early days the strength of product-market fit is unknown, so it’s imperative to not hire others who will become a layer/buffer between the founder and customers/prospects.
Misjudging the strength of product-market fit leads to hiring too many people too fast and increasing costs and burn rate. The more people/distractions that aren’t set up for success as there “isn’t something to sell” only compounds the difficulty of actually finding and strengthening product-market fit. And as we all know, strong product-market fit is the only foundation on which to build a successful business.
8. Poorly Set Goals ruining the commercial organization
This one kills me. Of all the difficult things in business, this one is solidly in our control. Why mess it up? I preach over and over in goal setting, “tough but fair.” I always see “tough”, but I don’t always see “fair.”
Misaligned expectations are one of the main reasons I see strong product-market fit startups flounder. Some fail. Some just burn through people and cash unnecessarily by setting the wrong expectations with the Account Executives and Sales Leaders.
I’ll elaborate on the two examples I see constantly: top-down and bottom-up.
Top Down:
Let’s say your startup has raised money. Great! That’s already one step toward overcoming the odds. The next stop on venture road is to hit the infamous T2D3 — Triple, Triple, Double, Double, Double. As you probably know, I’m talking about a term used for annual revenue growth multiples that is commonly used as the benchmark for hitting escape velocity and getting on the path to IPO (or $100m+ annual revenue). That means going from €1m to €3m, then €9m, €18m, €36m, €72m.
With these wildly challenging growth expectations, the first order of business is to hire someone to do sales. If the other mistakes in this post have been avoided and there are 1 or 2 solid Account Executives on the team ready to sell, then they will need goals, right? Some founders instinctively reach for the growth rates above as targets for their sales team.
This doesn’t account for anything bound to reality and almost always fails. Sales is very much a mathematical equation and this math almost never adds up.
Now for the bottom-up approach that fails:
Many in SaaS like a 50–50 base salary to commission model for compensating Account Executives. This is ideal as it shares the risk evenly between the Account Executive and the company, but it often overlooks some simple issues.
Let me explain how it can go wrong: if the market rate of total compensation for an excellent Account Executive is €200k with the 50–50 model, you’d have a €100k base salary and €100k for the commission/variable. This is probably closer to $250k+ in the US.
Using a common commission rate of 10%, this Account Executive would need to close €1m to achieve their total compensation with €100k commission. It’s a safe bet that most 1st, 2nd or 3rd Account Executives hired at a startup aren’t going to close €1m in their first year. This comes with a lot of assumptions, but usually the mechanisms aren’t in place to help propel this type of immediate revenue production.
We can’t escape the high market rate for total compensation for talented sales people (nor should we). It’s worth paying a premium for excellent sales talent as it has significant ROI, but I digress. The key is to accept market rate total compensation and pay a higher base salary to ensure the commission/variable portion is in reach. This would mean adjusting the base salary up and the commission/variable down in line with what the Account Executive will probably generate. Not sure how to do this? Hire an advisor.
The key to avoiding poorly set goals is to set a revenue goal that is tough but fair, whether you do it more top-down or bottom-up. The key is to build a realistic model that matches the top-down goal with the bottom-up goal and is actually achievable.
9. Trying to reinvent sales/process/org/compensation
This is a mistake that continues to baffle me. While every company’s path to product-market fit is different, and every product requires its own unique go-to-market (GTM) motion, trying to deliberately avoid general best practices that have been proven to work over generations is madness.
The key is to take all of the science that has been refined and proven to work for driving revenue growth and adapt it to your startup’s strengths and weaknesses.
When I see founders declare, “We’re not going to pay commission,” I know they will never (if you have an example please email me) build a high-performing sales culture.
“We’re going to do this without a sales team.” Do you expect to see a lot of $80k deals getting signed through an online checkout?
While the above examples are extreme outliers, too many founders ignore best practices that need to be incorporated to increase both the likelihood of success and maximize revenue growth. Like the majority of “The 9 Worst Sales Mistakes Founders Should Avoid,” these are based on best practices from experienced companies and operators. When I hear, “We’re going to do sales differently!” I start wondering which mistakes will be made first.
Bonus — Trying to save money on sales talent
If you haven’t noticed, we like to use 9s in our post titles… Well, I actually have a 10th mistake to avoid.
Everyone’s opinion on whether it’s fair to pay salespeople a lot is completely irrelevant. I sometimes find myself in conversations explaining why salespeople are highly paid. However, it actually doesn’t matter because the market rate dictates the cost of sales talent or any talent for that matter. If we want sales talent, we have to pay what the market is paying. It’s our job to debate and determine the value they bring to our organization.
And that value is huge if they produce revenue. Trying to “save money” and compromising on quality for revenue-generating members of the team is a very short-sighted endeavor. Good salespeople will massively outperform lower-quality salespeople. Great salespeople will outperform good salespeople. The best salespeople I’ve seen are on a whole other level of performance and often double the revenue production of the second-place Account Executive in a company.
It always comes back to math with these things. If an Account Executive has an €800k quota and you can hire the best Account Executive for €20k more than the second-best Account Executive, then it will likely pay off. Even if they only produce 10% more revenue over the course of a year, that’s another €80k in revenue.
The return on investment on top sales talent will pay dividends for many years, and trying to save money that results in lesser talent is a losing proposition.
Summary:
I’ll keep this part short. Everything above comes with some exceptions, of course, but with a huge sample size to look at, it’s the startups and founders who have avoided these mistakes that have thrived.
