You Should Scale Your Tech Company Sales Force When…..

Many tech executives would complete the sentence in the title above with something like “when you ship your first product”. Or “when you start your company”. Or “as soon as possible”. All have a similar meaning. Every tech company needs sales revenue and would like as large a hardware or software sales force as possible to drive revenue growth. It seems logical that these are all appropriate responses. But in my experience, it’s not always the case.

First of all, I’m using the term “scale your tech company sales force” in a very flexible way. I really mean taking it up to the next level, whatever that may be at present. That means different things to different hardware or software companies’ sales business models. As well as those that are at various stages of development.

A common example

For example, in a ground-floor SaaS start-up, “scaling the software sales force” might mean hiring your first dedicated, professional sales rep! In early-stage circumstances, sales activities are often performed by company founders or senior executives (and rightly so). At an intermediate level of development, this might mean progressing from 1-3 in-house software company sales reps to hiring a skeletal outside field sales force. All are covering your home country and organized by region. At the highest level of company development, scaling the mature software sales force could mean hiring a large number of sales employees. For every developed region of the world. Regions outside of the home market are often handled early on in a company’s sales organizational development by resellers, distributors, or other partners.

While these events are very different in many ways, they all represent major turning points in the composition of your sales organization—and potentially your sales process as well. The important things these three “step up” examples all have in common are that they cost a LOT of money and usually bring quite a bit of change in the way your company does business.

In most growing tech companies, management is often eager to move to the next level of revenue growth. This frequently means greatly expanding the hardware or software company’s sales force to fulfill and drive that growth. As I mentioned above, sometimes you can hire salespeople (or scale up the sales force) too soon. So first, I’m going to flip the original sentence around and detail when I think you SHOULDN’T scale up your tech sales force. Below are four potential circumstances that may indicate that scaling up your sales force at this time may be a bad idea…

Product not really ready

This is the technology business, you’re not selling peas or perfume. There is considerable risk that any new software or hardware product may be very buggy in the period immediately after it ships. This is always a tenuous time, when caution should be exercised to not get too far ahead of the situation. Ensure you don’t implement any next steps too quickly. In addition to sheer buginess, sometimes products just disappoint in the marketplace, for many reasons:

Three reasons to slow your roll

1. The price may be too high. You’ve not picked the proper distribution channels, and product planning wasn’t perfect. This leads to key features that the market requires but are missing in this version, etc. In these cases, massive hiring of new sales reps would be very ill-timed and possibly even counterproductive. It makes sense to hold your powder until the product is ready to make real headway in the marketplace — which is when you’ll be able to maximize your sales force ROI.
2. Another common product-related issue happens when the product is stable and able to meet the needs of the market.  But due to the early stage of the product category or technology, it requires an extreme amount of technical hand-holding. In this particular situation, it may still make sense to scale the sales force. But it may require more technical support, such as expensive field support engineers, than you might have counted on.
3. If the new sales reps cannot sell the product somewhat independently, the ROI of scaling the sales force is greatly reduced. In comparison to products that the reps can handle themselves with a reasonable amount of training and modest levels of tech support. In these circumstances, you may be better served by deferring massive sales force expansion to conserve most of your capital. Then, scale up when the product is more mature and can be sold in a more traditional, sales-driven fashion. A more modest mix of a few additional sales folks, along with beefed-up technical support resources, may be advisable in the interim.

The hardware or software company’s sales process is not fully developed

This is a common occurrence that I find with companies that are extremely eager to grow. They can make those difficult initial sales, filling out a good list of reference customers, or maybe even going well beyond that. Possibly, they’ve even made some very impressive sales to blue-chip customers. Whose names will carry weight as they attempt to sell to the broader market segment.

But in many cases, those sales have been made with an enormous hand-holding effort. Sometimes, by using scarce senior resources, product customization, massive price discounting, and the like. Of course, to get those early critical sales, everything necessary SHOULD be done. But at this point, it’s not unusual that every deal has been difficult, unique, and has required resources or policies that can’t be duplicated when scaling to a wider sales campaign. What really sells the product? No one knows, because every deal has been different and often required unusual efforts to close.

In essence, there is no repeatable sales process that the new sales folks can be successfully trained to use. This is a prescription for failure when you scale up your sales effort. I find it to be a common reason that companies with initial promise often fail to reach the potential that their management feels is achievable. Any expansion of sales activities, whether by an internal employee sales force or external sales channel, must be grounded in a well-understood sales process. One that can both be taught to and then repeated by the sales resources you are tasking to bring in the orders.

Capital is not available to invest in the sales force long-term

I’ve also seen this issue destroy or cause great retrenchment in many tech companies. What happens is that the product appears ready. Plus, the company believes a repeatable sales process is in place. The decision is then taken to go full speed ahead on hiring initial sales reps. Or if the company is more mature, scaling the sales force much further. But the “gotcha” is that there isn’t the capital base to handle the additional burn rate this creates. The additional burn can be substantial when adding significant salespeople for the long haul. The assumption is made that the product is great, so sales will “take off,” and the new sales force will “pay for itself” in no time.

Sadly, in most cases, this is wildly optimistic. There is a learning curve under the best of circumstances. In the tech industry in particular, many things can go wrong, as discussed in other parts of this article. It is usually imprudent to expect new salespeople to begin paying for themselves within the first 6-12 months. If they do, great! But you need to have the financial wherewithal to stay the course if things don’t immediately go as hoped. Salespeople should be seen as a long-term investment. Not viewed like a short-term or one-time investment, such as a marketing campaign, designed to rapidly goose your revenue. So before you make that huge investment in increasing your sales force, make sure that you have the financial staying power. You must be able to absorb an early negative cost impact for quite some time before your ROI kicks in.

The company’s infrastructure is not ready for a larger sales force

Above, I alluded to a few key issues. Those who can torpedo the effectiveness of a greatly expanded hardware or software sales force. On a broader scale, with a greatly expanded sales force often comes an uptick in the demands upon other parts of the company. I’ll refer to this generally as the “company infrastructure”.

Do you have an HR department that can properly recruit, onboard, train, and service the needs of the new sales recruits? Is there adequate office space and technology infrastructure to house them and enable them to work effectively? Is the marketing department staffed adequately, and does it have sufficient budget to create the lead flow to keep the expanded sales force busy? Or will they be forced to spend time inefficiently doing a lot of cold-calling? I often refer to this as “door-to-door marketing”.

Most importantly, in the tech business, are there adequate technical resources available? In the form of sales engineers, demo units, and liaisons to the development team? So that deals aren’t held up waiting for sales support? These questions may seem obvious on the surface, but I see many companies that are “in a hurry” skip one or more of these steps. They often proceed right to massive sale hiring, figuring it out as they go along. Sometimes it works out fine, but it typically ends in catastrophe.

The bottom line

The points above detail when you should be cautious about expanding your sales force. Then, when should you scale up your sales team? I’ll finally flip the discussion back around and tell you how I would finish the sentence contained in this article’s title: You Should Scale Your Tech Company Sales Force…

Only after you’ve ensured that your entire company is ready. Premature sales team expansion can be very costly and disruptive. Under bad circumstances, it can really put a hitch in your growth plans.  In extreme, overzealous cases, I’ve even seen it kill a few companies along the way.

Above is my list of items that should slow down the scaling of your hardware or software company’s sales force. Is your list similar? Am I off base? I’d love to hear your viewpoint. Post a comment to add to the list above or take exception to the whole concept.

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