This is a transcript of the Bowery Capital Startup Sales Podcast – Scaling Sales with SDRs with Sam Jacobs (Axial) and Bryan Rutcofsky (Yext)
EV: Hello everybody and welcome to Episode 4 of the Bowery Capital Startup Sales Podcast. Today, I am here with SJ, SVP of Sales at Axial and BR, VP of Sales at Yext. Hi guys, how are you doing?
SJ: Good, how are you Eric?
BR: Glad to be here.
EV: So today we are going to focus on scaling your startup Sales team with a focus on the SDR position and growing back into kind of the accounts executive position, how they interact with each other, but first I wanted to start off with just a little bit about your background.
SJ: Sure, so this is SJ. I run the Sales organization in the business development function at Axial. Axial is a SaaS business that connects investors, advisors and operators of private businesses in an online network and we build business development tools for investors and advisors to private companies. My background, I have been with the company for four years. Prior to Axial, I spent 7 and half years helping grow Gerson Lehrman Group, another New York based financial services startup from roughly 20 million revenue to 300 million revenue over the 7 and half years that I was there running their account management organization, running different business units for them and just helping them grow. So that is my background.
BR: This is BR. I currently service the VP of Sales for the small business channel as well as overseeing the certified partnership channel at Yext. Yext is a geomarketing software that allows any business with say physical location and ability to control all of their online content, everywhere the customers are searching. Yext currently sits at 1 Madison Avenue, 300 employees, just took over about 100,000 square feet. Prior to being at Yext, I actually was working for a smaller telecom company down in Florida, spent about 6 and half years there working my way up from an account executive to corporate training manager to a sales manager to leading a team of around 90 people before joining Yext about 7 years ago.
EV:Awesome. So obviously now you guys are managing sales teams that are relatively large. Can we take it back a little bit and talk about making that first sales hires. How do you know that you are ready to make that first sales hire?
BR: So for me, I think joining Yext, when I joined back in 2007, we were small startup called GymTicket.com. I joined as the first sales executive with the thought being that I would figure out the sales process, the sales model and then scale a team around me. I probably spent the first 6 to 8 months hammering the phones. My job went from managing group of sales people down on my role at South Florida to being back on phone and selling again in New York City. It took you know a bit of time to understand exactly what it would take to be successful and specific market that we are in. We put together the sales scripting. I put together the concept of sales training to bring on new hires and in about 8 months, we thought we were ready to initiate our first hires and we made two hires in December 2007 and then started scaling team from there.
SJ: I will say similar to Bryan, I think the first thing that you need to think about is whether or not you are going to be able to do something that you are asking somebody else to do and so when we started with Axial, we had few folks that were making phone calls. We actually had sales people prior to my arrival, they no longer are with the company but they were I guess when you know you are ready to make hire, when you think you can hit the number that you need to hit in order to hit the revenue target for the business. So one of the easiest ways to do it and one of our board members, Tomasz Tunguz over at Redpoint mentions this is if you think you can hit quarter, once you are able to predictably hit quarter, you are able to hire next sales person. The thing I would say from my perspective is there are sort of two types of people that you want in the sales organization and they are different based on the stage of the company. At the beginning of the company, you want to startuppy people and as the company grows you want the sales people and they are sort of different from that perspective, so we have lot of people when the company was very, very small where they wanted to work at a start up, they wanted to have lot of experiences, they did not self identify as long term professional sales people over the course of their career, but they wanted to be involved at an early stage in a business that was very fledgling and that was learning to grow. Those are the people you need at that stage because you are not going to have lot of the training and you are not going to have a lot of processes that you need to scale up the organization so it is going to have to be a situation where they are going to just be open to and embracing of ambiguity. The next stage of the sales process and the next stage of the company growth, you are going to need to hire people that actually self identify as sales people and I think there is a big difference so as we have grown, we have started to look for people that are self identifying. As sales people they want to be on a sales track and the people that originally we hired, that just wanted to work at a start up, largely have actually gone on to start their own businesses at this point.
EV: What was the difference between when you were hiring let us say this next first sales hire versus later on in the organization when you were five to 10 people as a group or as a team to bring them on, what is the biggest difference in type of person that you are hiring and also where you guys are as the sales organization.
SJ: Well, for me again, the bigger difference is I am looking for more open-minded people at the very beginning of the process and as the company grew, we would look for people who were self identifiers and who wanted a career in sales and that was a big difference because there are lot of folks that come out of good schools that are very smart, but they do not self identify and wanted to be in sale profession, those people are interesting while we are building our process, but at a certain point you get to the point, where you have a certain number of calls that are expected, a certain number of demos you are expected to run over the course of the day. When you are good at sales, the processes are very repetitive, it is process based and numbers based experience and so we wanted to hire people over time that we are comfortable with that because they were motivated by being great at sales as opposed to just wanted to work at the startup. Right now, I will tell you about the profile of the people that we look for and this is pretty specific. We look for former college athletes from tier B liberal arts schools that is the ideal profile. Somebody that played basketball at college at place like Holy Cross, so they did not play at Florida State, they have been through a competitive experience but they also understand the importance of academics and they played enough to know that they were not selected to the All American Florida State and they had to play at Holy Cross, we like those people because they are competitive and they got discipline and they tend to be smart and hardworking.
Bryan Rutfcosky: Just wanted to add one thing. I think it is on consent point. The initial sales hires have to be that core group of individuals that you feel that you can grow your team around and it is very important that you are very selective about the first group of people that you bring up and I am not saying you should become less selective as time goes on but it is those first hires if you make a mistake early on, it is going to cost you way too much money and way too much time to recoup. So you have to be very, very diligent about who you bring on to the team. Later on down the road, you still want to bring out like Sam was saying the type A alpha players. I also actually , I am not going to be specific as Holy Cross basketball player but the idea that the athlete or anyone that played sort of intramurals in college or had any sort of serving type role in a restaurant, people that are used to asking for things or trying for things and selling, I know the servers always have those competitions in their restaurants for anyone that have played any sport ever at competitive level knows what it is like to lose and the important part of being a good salesperson is understanding that you are going to lose from time to time but being able to pick yourself back up the next day and go right back at it like it did not happen and that is why I think athletes sort of have that tough skin that makes them successful in that role.
SJ: They have lost a lot. I like people with chips on their shoulders too. So people from working class backgrounds that have something against the world, that have something approved, those are good people.
EV: So you guys have the characteristics of good sales hire down. It seems like pretty well. A lot of your sales processes in the beginning were going out and kind of make their own leads, going out and prospecting on their own, but honestly you cannot just hire 100 of these reps at once. It is not scalable, why does that break, why cannot you do that, what are some of the things that mistakes that companies make when they try to scale too quickly?
BR: I think if you hire too quickly, one of things that I will never do is I will never have more people in a training role than I have active sales associates on floor. I think once the balance shifts from there being more trainees or more hires to more senior people, you lose the ability to control the culture that you have spent so much time and energy to build with the existing core group of people that you have, so if you have to sort of overtime gradually grow that floor, so if you have a team of 50 people, you can be comfortable hiring you know a training class of 10, 12 or 15 people and you know sort of putting them in on the floor with your existing sales staff and knowing that as long as you have good core group of sales people there that you can trust that they will teach and show those new hires exactly how they job needs to be done to be successful. Now, if you try and do it the other way, the newbees that don’t know anything and they just try to figure out as they go along their opinion starts to outweigh the people that are tenured and senior on your floor and you lose the control and I think it is for any sales leader or for any manager, you need to have sort to finger on the pulse of what is going on with your team at any given point in time and the easiest way to do that is to make sure that you have people that you trust on that team, working and fighting along besides you and helping them cultivate the environment that you want to kind of foster for all the new people that are coming in.
SJ: I would say the thin bricks, the interesting part of all this is that it all flows down from the strategy of the company and it flows down from how unprofitable you’re willing to be and how big your market is and how quickly your CEO or your board wants to grow and that sounds like pretty strategic stuff for why the sales culture would break, but if you are CEO is peddle to the metal trying to triple the business or quadruple the business every single year because the board is breathing down at his neck because it is SMB market works and massive market and you feel like it is first move advantage into that market. I think the propensity and it is not Yext but there are lot of companies in New York with this profile, their culture breaks pretty quickly there. The people feel like they need to add 100 or 200 sales people just to meet the needs of the market or else they are going to lose to the top competitor. We have benefit of servicing the private equity and investment community and so it is not the SMB universe and we are trying to double every year or triple every year, we are not trying to grow 5x every year. I think it is also function of your price point so basically what I think is the cultures starts to break as Bryan said, you’re hiring more new people than you have old people. The other place it starts to break is when you are trying to bringing outsiders to be managers. That is the big mistake. The best way to preserve culture is to show people inside the organization that they can get promoted up and that there is a path for them. We never want a situation where people feel like the outsiders are always more beautiful to you as VP of sales or the CEO and the outsiders are beautiful and by beautiful I just mean their resumes looks great, you are telling yourselves tales about having a perfect hire versus the person that you are grooming from the inside because may be you are just too familiar with the shortcomings and where they need to develop. So I think promoting from within is really the key place where you can preserve the culture and I think that if you do not have the training process down, if you do not have the materials down, if you are not selling from the script. If you are selling from the script, you need the script. If you don’t have the script, you got to be careful about how many people you have hired, because if you don’t there are lot of people in the market and they are not trained. You are going to blowup your pipeline before you have a chance to rectify your situation. I would also say finally that again from promoting from within, if you are going to have an entry level role that grows up into different levels and ultimately there is a career track, you can really lower the throttle on sort of the risk aperture for your business because you are not putting people, we make the mistake of bringing the outsiders and sales experience and subject matter experience into the organization and they just did not do well. It took them way too long. We had built our revenue target for the company from the head count of ramped up AE numbers on the sales team and they were not able to contribute to that so we needed all the aids to over perform. We have since rectified the situation by creating an entry level role which is SDR role and it stabilized the organization. So I really think if you have a path where people can come in at entry level and get promoted, you have got much better success and chance for longevity.
EV: When do you know that your company is ready for this SDR role?
SJ: Well, again Bryan can tell some stories about where it works and where it does not work and the functions and the things that make an SDR worth while tend to relate to the sales cycle and the ASV the average subscription price of the sale. My big mistake at Axial was not building the SDR function early enough. We waited too long. My guess is that your third hire in sales should be an SDR after two account exectives. So, I think that you should as quickly as, once you know you have product market fit, you have something to sell, your sales people can hit quota. You then want to begin building the scalable organization and I think that is when you layer in the SDR after two account execs. So you have the ratio of one SDR to two account execs. But again it’s not going to be a transactional sale as Bryan will tell you right now.
BR: Yea so, as Sam was mentioning, I’ve actually attempted the SDR role about two years ago at this point and this was on the small business side of the house at Yext. And I think the reason it failed was two main reasons. The biggest reason of both was that the sales itself was just too transactional. To get a decision maker on the phone for the type of sale we were trying to offer, which had a price point of an annual cost of 500-800 dollars. It was just too precious to have that decision maker on the phone and then just push them off for another call so that an SDR or a caller if you will would just get the owner interested in the product and familiar with what Yext and the PowerListings product could provide and then have another account executive call them back a day or two later. The odds of getting that person on the phone again were slim to none. So, we saw the close ratios from top closers go down because they weren’t able to keep the owner on the phone to have that conversation. So, because again the way the sale would occur through Yext and how many touch points it actually takes to close the sale. It didn’t allow for success of the caller closer SDR type role on the small business channel. Focusing on my partnership team now, however, with larger dollar sales, much more committed monthly revenue coming out of each one of the partners that we bring on board and dealing with a higher level business if you will. The type of decision makers that we speak with now are much more acustomed to the idea of speaking with someone to wet there appetite on what a partnership with Yext could look like, understanding a little bit about the product without delving too deep into what the demo will be, and they are interested enough to commit to a date and a time and setting aside legitimately an hour of time to have a conversation with an account executive about what partnering with Yext would look like. About how they could take the Yext product and mix it in with their current product offerings and deliver that out to their customers. Going back to the small business side of the house a typical sales call the average length of the call is about 25-30 minutes and the sale can be complete. With the partner side of the house you’re looking at that initial contact from an SDR then you’re talking about an hour maybe even an hour and a half long demo walking through the product walking through the entire platform. Giving them a full understanding of exactly all the intricacies of what Yext and PowerListings can provide for their business and for their clients and then having that follow up call or follow up demo with other decision makers or influencers within that specific agency to finally getting that sale closed and then flipping it over to the Account Manager side to help grow that business as a new partner of Yext.
SJ: I think you can see from Bryan’s comments the relationship between sales cycle, sales price, and the importance of the SDR function. Because what Bryan just described was we’re willing to slow down the sales cycle because we are going to sell it for a lot more money once we do the proper qulification and that is the reason that the SDR could potentially make sense.
BR: And it also allows me to have the better account executives, the people that I know are good at closing new business, on the phones with people who are legitimately interested in becoming a partner of Yext. And I’d much rather have my account executives focused on demos and closing calls all day long then spending their time prospecting if I can avoid it. So the SDR role allows for that by keeping my better closers, my better sales people jam packed with appointments for 4 or 5 hours a day.
EV: So does this handoff always occur at the demo stage?
BR: So, yes in our world the SDR is only responsible for the relationship with that contact up until the point when they can actually schedule a demo for the client and the account executive. The only time the SDR will get that lead back is if the engagement falls through, the demo never occurs, the account executive will make a few attempts to reschedule and have a conversation with this potential prospect, however, if it does fall through over a set amount of time they will kick that lead back over to the engagement funnel where the SDRs will be responsible again for trying to reach out and reschedule a demo for a future date, it could be with a different account executive at that point.
SJ: Yea for us, it’s similar, it’s not technically a demo. We think of a demo as just sustained scheduled selling time and for us we would call it an intro call but I think the practice is the same. I actually don’t want the SDR to go too long. If the call is going too long that means the SDR is taking up too much of the selling time that I want the account executive focused on. So we really want them to qualify the conversation so that the person really understands that this is a for money service, that here is what we do basically, that they are a decision maker, and that they work at a firm that would benefit from giving us money. And then after that we want them to create the opportunity and to flip it to the account executive. The best practice for us is to make sure that the person on the phone accepts the calendar item on the call, in the same way we’d want an account executive to get the credit card or close the business on the phone.
EV: So they send the invite while they have the person on the phone.
SJ: Yea, I like that I like them saying, hey I just want to make sure you get the invite did it come through? Okay, can you go ahead an accept. It’s just the same thing as making sure they sign the agreement on the phone. It just confirms the handoff. Obviously today in the modern era the way you make sure the call actually happens is that you make sure that they have a calendar item. The risk of the SDR function, the reason close rates might go down is because of that handoff. Because there is something lost in translation when you’re handing off the conversation between two people even if they are two well-qualified people. So, you want to make that handoff as tight as possible, and you want to ensure that it gets into the hands of the account executive with as much certainty as you can.
EV: Great, and SDRs are obviously for-profit individuals as well. Can you talk about their compensation and how you deal with that. And then maybe a little about their upward mobility and how you groom them to become these account executives.
SJ: Sure, so I’ll start and this is again, Bryan has really interesting insights on this issue. For us, I’ll just say that the standard, the function is emerging so its not that clear that there is a standard, but you have basically two different options. You can come the SDR based on things that are totally within their control, which would be the quality of the opportunities they created for the account executive or you can comp them based on the outcomes that are not technically within their control which would be whether the business closes or not. Right now, so we started off comping on the flips, on the creation of the sales opportunity, a sales qualified opportunity that gets into the hands of the executive. We found that those outcomes were not correlated perfectly with the business outcomes that we wanted which was closed revenue. So we’re actually at a place where we’re comping 100% on a commission basis based on the opportunities that the SDR creates whether or not those closed. Now that’s controversial, I would say the industry standard is 50/50. If you talk to people at Salesforce, and we’ve done some research on this, it’s typically 50% of the comp is that the opportunity is accepted by the account executive meaning it meets the criteria and maybe they run the demo or they run the intro, and then the other 50% is closed business. Bryan has different experiences.
BR: Yea so, then you have the crazy people like me who take a totally different stab at the compensation for the SDRs and again I’m doing this mainly beause I’m trying to pin down exactly what my expectations are for each SDR. But currently right now the way that I handle compensation for SDRs is a flat based salary with the ability for a one off bonus that has nothing sort of tied to it. There is no dollar amount, there is no max, there is no minimum, there is no time frame to when I might bonus an SDR for doing what I would consider to be a successful job. So, to Sam’s point, I completely agree that it’s great to align the SDR with the vision and the focus of the company, which is to bring in new revenue and at the same time when you think about an SDR then having the, having their compensation tied to the success or the ability of an Account Executive. There are obviously pros and cons to that. Good account executives are going to make the SDRs more money, bad account executives are of course going to cost them money and then perhaps lead the SDRs to not feed the account executive new opportunities, which then causes the account executive to suffer even more. So before I wanted to even walk down that path, I find something very powerful and motivational for an individual contributor to just get paid for doing their job and then given something a little extra for what could seemingly be no reason. So to sort of tap somebody on the shoulder and say, “hey you really kicked ass last week or last month I’m throwing X dollars in your paycheck on Friday. Keep up the good work.” Really gets someboday to appreciate what they do and become more excited in the role that they are in. That being said, I do see the other 50% of what Sam had mentioned of potentially paying the SDR on all successful flips to account executives. There is the thought process there that if I can get someone to talk to me as an SDR. I understand based on the qualification questions that I have asked that they are the right fit for a partnership opportunity for in my case Yext, and I can get that demo scheduled. If that demo or the account executive calls and that demo happens I can now start comping SDRs based on the flipped accounts that go from lead to opportunity to use Salesforce speak. I may move towards that eventually but right now as I’m sort of building out this SDR function I just want everyone focused on doing what I think is most important thing is which is making as many outbound reaches as you can and getting as many opportunities sent over to the account executives, and we’ll sort of let the details flush themselves out as we start to look into the data once we’ve accrued enough of it.
EV: Can you anticipate any adverse effects of this once that SDR becomes a full-fledged account executive because they haven’t gotten used to that style of comp.
BR: So I think that any SDR that I hire, comes in knowing that there should be or there will be an opportunity to become an account executive. And I think that by nature most sales people or almost all sales people are money motivated and appreciate having a set focus and a set goal and that being said, I definitely have a set goal for each of my SDRs and they know what they are expected to do on a daily, weekly and monthly, and basis as far as a new appointments are considered. But just going back to how I’m handling the bonus, there is something to be said for someone achieving the goal and expecting a certain payout for something versus achieving the goal and not really expecting anything extra and then getting it. It just makes people feel better and that’s what you want. You want happy employees. Of course any compensation plan for a sales executive or any account executive for that matter sort of becomes a deserved, earned commissions but I think once you move into a role of an account executive there is a lot more pressure involved in having to perform and you are rewarded greatly for succeeding and hitting those efforts and I want my SDRs to want that role and to want to move from that SDR function to that role as they prove their value.
EV: So I think that we are actually running out of time, so I wanted you guys to leave our SDRs or early sales employees with your favorite pro tip that you’ve learned on your job.
SJ: Well, the main pro tips I have are, there’s a couple. One of them is, get people to do things on the phone because you’re not going to be able to get them back on the phone so that’s, if you’re an SDR get them to accept the calendar item on the phone, if you’re a sales person get them to sign the contract on the phone. We’ve had some issues where sales people where the guy says send me the agreement and I ask when is that coming back when is it getting signed. And they say the guy is going to take a look and get it back tomorrow and it disappears in to the eather. So as much as you can do on the phone I would do on the phone. The other tip I have is for any sales professional. It’s just as Bryan says, it’s a numbers game and I really think we stress a lot at Axial is know your equations and what that means is know the inputs and the outputs. If you want to make $200,000 and you understand your commission plan and that means you need to make 100 sales in a year know what your outbound prospecting, know what your cold-call to onbase percentage is, onbase meaning getting a scheduled meeting, know what your conversion percentage is from your intro calls to your closes so that if you have some area where you want to improve, you’re like I want to make five sales and I close 15% of my sales I understand how many cold calls I need to make. I just think knowing your business and knowing your numbers is key to being successful in sales.
BR: For me I think the two pro tips that I would give are the first one, become an expert in your space. And when I say that I don’t mean your product. Obviously any salesperson or SDR or anyone selling products to anybody needs to be an expert in their own product. But is also extremely important to be an expert in your own space. For us that would be sort of the online marketing, SEO, SEM world. Do things like read articles that are posted online, follow specific people on Twitter that are big into the SEO world, join LinkedIn groups that open conversations and discussions about the space you are in so that you can speak intelligently to any decision maker or any business owner about not only your product or also the space you are in. The other thing and this really stems from my days being in sales a nd building out small business teams and now the partner team is don’t be afraid to close. I push on that so hard because especially being involved with younger sales folks it’s something that people are just afraid to hear that no and I push and push and push and I try to teach people there is a way to close business without being pushy and you need to learn how to close.
EV: Awesome, thanks a lot guys.