The Ultimate Guide to Building & Structuring a Sales Team 💸
Understanding the sales motions around SDRs, Account Managers, PLG, inside sales, outside sales, & regional reps.
Is there truly a more complicated problem in the universe than trying to figure out “how do I structure my sales team”? There are so many different models it’s really hard to begin even to understand where to start.
Geography-based sales reps who handle the entire lifecycle (but for some reason only cover a certain city/state/region).
Sales Development Reps (SDRs) who are prospecting and then handing over leads to an Account Manager (AM).
Inbound sales reps who are “working inbound leads” trying to maximize the conversion rate of Marketing Qualified Leads (MQLs).
“Outside” sales reps, braving the weather & burning the rubber to bring home the gluten-free bacon.
Product Led Growth sales team working high ticket Product Qualified Leads (PQLs).
Fear not - for I have traveled the world, interviewed the experts, and wrestled with the building-a-sales-team-demons so that I may distill the answers for you, my dear reader.
To understand what kind of structure you will need to optimize your sales team, you first must be able to answer the question, “Where do my users come from?”
Forget about the actual human salespeople for a moment, and think about the channel & messages that drives your user acquisition.
Google/Facebook/TikTok/Direct Mail/etc ads that turn into demo’s or leads.
Organic SEO or content marketing (think Hubspot articles that create inbound demand).
Cold email sequences.
Cold phone calls.
“Knocking on doors” or walking into someone’s office.
Referral partnerships (think mortgage loan officer + real estate agents).
The way that you send messages and the channels that bring users into your product, will ultimately determine the most optimal structure for your sales organization.
Geography-Based Sales Reps
This sales structure is when each rep has a “territory.” That territory can be a city, a state, or multiple states, the concept here is that each rep is responsible for a specific geographic location.
For example, I might have 50 sales reps, one for each state in the United States. Maybe I’ll split California and Texas into sub-territories.
Why on God’s green earth would I do this? Why not just have all my reps based in a single call center in Boise, Idaho, where the average wage with a college degree is ~$11.50/hr, and most people would be ecstatic to be making $70k a year?
There are a few first-principle concepts at play that should be guiding your thinking here.
1. Localized operations - the first and most obvious reason revolves around your product. Maybe you’re a cleaning service that only operates in that state. Maybe you need a state-specific license. Whatever the reason - sometimes your operations get in the way and you HAVE to operate in a region-by-region method.
2. Local partners - If you get business from having a network of partners, a geography-based approach can be super effective.
My favorite example of this is the relationship between real estate agents and loan officers, these two professions have a very close, mutually beneficial engagement. They will work off each other, referring business between themselves.
It’s REALLY hard to create a deep relationship with a real estate agent that lives on the other side of the country. It is 100x easier to walk into a local agent’s office, to show up at their open house, and to meet with their local clients in person.
There are huge networks of professions that refer each other business. Not just real estate agents and loan officers, but financial advisors, advertising agencies, photography shops, cleaning companies, construction companies, lawyers, accountants, and so much more.
If your acquisition heavily relies on referrals from partners, it is so much easier to build these relationships locally.
3. Visiting clients IRL - Geography-based sales reps are often “outside reps” AKA they physically go outside to interact with clients.
Sometimes you can conduct 100% of your business over the phone/Zoom, this is especially true in the post-COVID era. If you need to physically interact with your clients, however, having a geography-based sales team will save you a literal fortune on plane tickets.
This might be because you need to visit your clients to set up your product. This might be because walking into their office (or knocking on their door) is an extremely effective method of generating new business.
Whatever the reason, if you need to see your clients face-to-face, you’ll likely want to segment your team by territory.
The opposite of these concepts, can be an extremely strong signal that you DON’T need a geography-based sales team. If you don’t need to see them in real life, if you don’t rely on local partners or events, and if your operations don’t require you to focus on a specific region … it’s time to move on to a better structure.
Sales Development Reps + Account Managers
This is the standard playbook for VC-backed sales-led SaaS companies. Here you have an army of SDRs who are cold calling/prospecting for new clients and then some highly paid Account Managers closing high ticket deals (and maybe doing a bit of prospecting too).
In this model, the SDR is a specialized hunter seeking out new business. The Account Manager is a specialized closer, bringing big deals over the finish line.
There are two key things that need to be true for this model to make sense:
A high ticket value where a strong closer can make a huge revenue impact.
Cold email + cold calling are a primary channel of acquisition.
The standard advice for this model is that for every $1 you spend on sales, you should be bringing in $10 of revenue (ideally with an 85% gross margin). Basically, you should be selling really expensive things. Think $100k yearly contracts, not an $85 widget.
If one AM can bring in $5M a year in revenue, then that person performing just 10% better is worth $500,000. There can be massive gains made here by a super strong AM.
Where most people get confused, is when it comes to the SDRs. You only really need the SDR if cold calling + emailing is a primary channel of acquiring new users/leads/deals.
For many tech startups, this is the #1 way that they acquire new business. Nobody likes to brag about it, but you would be shocked at the number of companies that primarily gain new users through cold outreach.
However, if cold calling/email doesn’t work for you - then this model will likely make almost no sense … which leads us to our final “standard” model.
Inbound Sales Reps
When your primary channels of acquisition drives users towards your product, then you might end up in a situation where your sales team doesn’t NEED to go hunt for business.
Business just shows up at your doorstep (thanks marketing/PLG/referrals ).
No matter the reason why this is happening (maybe it’s Google Ads or a giant social media page, or influencer marketing or whatever), the name of the game is SQUEEZE THE JUICE FROM THE LEMONS™.
AKA - maximize the conversion rate of your inbound leads.
If you have 100 leads that come through, you want to focus extremely heavily on increasing how many of those leads convert into paying users. This means aligning comp not on total volume but on the % that they close.
It’s 10x better to have reps closing 30% of 100 leads, than reps taking 400 leads but only closing 20%.
Leads cost money. Leads have opportunity cost. If you’re spending $300 on every lead that means 100 leads is $30,000 in CAC. If you have a 4x ROI on your adspend, that means 100 leads is $120,000 in revenue.
With those numbers, the difference between closing 30 leads instead of 33 leads (a delta of 3 leads or 10%) is $12,000/mo.
In this model your sales team acts as a conversion engine, squeezing every last drop of juice from your inbound demand. You set up commission structures around this, you create long lifecycle campaigns & segment them based on user type, you put all your sales team in a single call center in Boise, Idaho & train them on your “squeeze the lemon” playbook.
Product Led Growth … but also Sales
It’s almost an oxymoron, the guiding philosophy of the PLG movement is that we can reject marketing & sales in favor of a new age of PLG … but then some really big accounts came in that were complicated and needed hand holding so we thought it was a good idea to hire some sales folk.
The PLG motion (in relation to sales) usually means there’s some “free” version of the product that doesn’t need a sales rep to access it.
Users will sign up for a product, no demo required, and then start using it/”become activated.” At some point, they will either be prompted to upgrade into a paid tier or it will push towards a demo with a sales rep.
There are a couple of first principle concepts that will guide your PLG motion & determine if you actually need a sales team here (and what that team will look like).
How expensive is the paid product
How complicated is the paid product
For a SaaS product like Segment, users can join for free and begin to use the product extremely inexpensively. As usage scales, however, you can find yourself quickly spending $100,000+ a year.
PLG is great in this context because when the user’s LTV is ~$20/yr, it makes literally no sense to hire a salesperson to try and convert more of those users.
Once it starts getting into the $10k-$100k+ range, however, is when you begin to definitely want that human touch to maximize the conversion rate of your high ticket deals.
In this context, the product allows users to qualify themselves through usage, and then once they reach a certain point, they become a Product Qualified Lead & a salesperson reaches out to introduce them to the Enterprise tier.
If the product is especially complicated, it becomes even more important to have a sales rep (or even a sale engineer) involved in the process.
It might require buy-in from multiple stakeholders
It might be extremely technical
You might have multiple products to sell them
The more complicated the buying process becomes, the more likely you are to need the sales rep sooner in the lifecycle.
Putting it all together
With all 4 of these models, the place you want to start is by first understanding how your product is going to acquire users. A PLG motion that relies on local referral partners is going to struggle, a SDR/AM process that’s trying to convert inbound leads isn’t going to perform anywhere close to a team dedicated to squeezing the lemon.
There are definitely slight variations of these 4 models & sometimes they will certainly overlap. At Rupa, we follow a combination of PLG + inbound + SDR/AM, but this framework helps us build, organize, and structure our teams most effectively based on the channel they are focused on.
So please - take your own first principles concepts, apply them to the models that fit your situation the best, and watch your sales team soar. 🚀
P.S. would like to give a quick shout-out to the sales leaders who have had a profound impact on my life & how I think about sales. Special thanks to Dini Mehta, Chris Cantrell, David Reid, Matt Scheid, & Alex Soran - I’ve taken major lessons from you all in the last decade.
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