Hiring Sales Teams in IT Services Companies

Here’s what we’re discussing in this episode:

-Why sales are difficult for IT services companies

• Lack of productized offerings
• Deep understanding of customer issues requires skills
• Easily mismatched client needs to ability to deliver
• Sales enablement

-When do you need a sales person?

-When do you need a sales team?

-What type of Sales roles should you hire:

• Hunter
• Farmer
• Business development rep

-What’s needed to make them successful

• An ideal prospect profile
• List of accounts to attack
• Productized offering
• Grinding, minding, finding

-If you’re going through an M&A process, should you hire?

Mike Harvath  00:03

Hello, and welcome to this week’s Shoot the Moon podcast, broadcasting live and direct from Revenue Rocket world headquarters in Minnesota. As you know, if you tune into our podcast regularly revenue rocket is the world’s premier growth strategy and eMoney Advisor for tech enabled services companies. Today, I have my partner’s Ryan Barnett and Matt Lockhart with me. Welcome, gentlemen.

Matt Lockhart  00:29

Hey, Mike, good to be with you. Yeah,interesting topic for sure. One that is, I think pertinent to just about anybody who would ever listen to this podcast.

Ryan Barnett  00:41

Yeah, I agree. And it’s something that’s near and dear to our hearts. So today, we’re gonna be talking about it, salespeople, so hiring sales teams, and IT services companies. And we’re really looking at why it’s important. When you’d like to see some salespeople, when you need to sales team, what kind of roles you should look for, and what to make those people successful. So I’m gonna start from the top and play moderator here. But just in general, sales are huge, important part to revenue, growth and profitability. But we have talked to many, many companies and clients, that finding a salesperson is in this realm and the IT services world is really difficult. And I’d love to hear Mike want to just kick us off, what have you seen, it has been difficult for sales to really kind of get locked down in our world?

Mike Harvath  01:38

Yeah, for sure. You know, I think that a lot of business owners it serves with business owners, when they get to a specific, you know, size, and they starting to feel the pain, hey, we got some opportunities and some leads, and some things need to follow up on we really need to self organization thinks that it’s simply as easy as you know, hiring someone who’s got a sales pedigree and saying, you know, here’s your desk, here’s your phone, knock yourself out, then it really doesn’t work that way, I think if you’re going to begin to build a sales organization, or hire a salesperson, you really have to set them up for success. And setting them up for success means they have to have something that’s positioned to be easy to buy with the quiet. And I would say that easy to sell this was fairly but certainly easy to buy. And a cornerstone of that, and we certainly talk a lot about this, in our strategy engagements with our clients on the topic are, you know, you have to have productize offering. And this goes back to, you know, it’s very difficult in tech services, and IT services to just position a solution to the problem by waving your hands or talking about, theoretically, how you might be able to help and then creating the value proposition for that work on the spot. So we need to build around some sort of productize offering, whether that be a wedge, as we often use the term, you know, to get in with some sort of a fee structure that’s, you know, easy to buy, or a variety of things that are easy to buy, you know, there needs to be a deep understanding of the customer issues. And that requires some very specific skills salespeople, as I’ve often said, telling us not telling it requires someone to have great listening skills and to be able to, you know, really hear what the pain points are with the client in be able to then position one of those productize offerings accordingly. And then also, I think, you know, you oftentimes, it’s equally to have a sort of mismatch client need to the firm’s ability to deliver and you get into the woods on that when a salesperson kind of over commits and over positions a firm’s ability to deliver and that again, can be we can sort of, you know, beat that one down, if you will, if you have agreement on privatized offerings, because typically those are aligned with the delivery organization. So, yeah, three reasons there’s obviously many more reasons why it’s difficult, if you will, why sales are difficult IT organizations but really that’s a sprinkling of things to start

Ryan Barnett  04:31

Matt, anything to add on there?

Matt Lockhart  04:34

You know, we try to keep these podcasts so like a treadmill session and um, you know, we’re going to need to focus down because there’s you can wait and go on forever. Yeah, let’s frame so we’re sort of talking a little bit in the context of you know, maybe lower middle market IT services firms that ya know, maybe I’ve been a salesperson but they’re, they wanting to fuel that next you know, level of growth and they’re, they’re kind of moving up to that, that next stage right, and, but I think this applies to just about anyone and everyone, the idea of growth, I think, in the context of sales organization, in sales in sales people really also needs to be put into the context of the overall go to market engine, which includes the marketing organization and, and are getting the right customers and segmenting out your best customers in the right way. As, as many of our listeners would know, we really do believe also that, you know, continuing to develop a vertical approach is important as a means of segmenting and differentiating. And this idea of differentiating is can be very difficult, and it surfaces to a buyer. A lot of IT services companies even in different segments can look a whole bunch of like, right? And so how do you enable, in the concept of differentiation, from awareness to first contacts with prospects to a sales cycle, and and let’s recognize that sales cycles and, and IT services can be more complex, even with productized offerings, that from a first buy to growth and add on sales and taking, you know, share of customers wallets, because you’re developing them to ongoing account management, to cross selling, and so on and so forth. I mean, all of these need to be put together to create scale. And how do you enable the right people within that overall go to market engine, to be doing the right things in a consistent process, and a consistent language that make you more efficient, and really, surrounding a customer appropriately. And so that sales individual is and, and maybe good thing would be to talk about the different roles within sales. But that sales function is one of many roles in that overall go to market engine that needs to be applied to drive scale accordingly.

Ryan Barnett  07:40

I want to just re emphasize your point, Matt, which is really solid in that if you put a salesperson out there alone, without the support of the team, it’s difficult for them to succeed. Even if they have a an excellent Rolodex. Oftentimes, we see owners and companies just be such the very understanding of what they can deliver. And they are understanding of customer needs. And they’re able to pair those things together successfully. So they’re selling things that can be delivered on. And when you start to bring a new person into the company, especially when you have something like a custom application development firm, it’s pretty easy to get out of your swim lane by seeing an opportunity, but then selling something you don’t actually do. And I think that’s a little different than never confuse sales and delivery, which is one of our models, but instead, something that is really hurting delivery teams if you’re selling the wrong kind of stuff. And typically owners can see right through that and understand, okay, we can do this but a brand new salesperson, or brand, some that you brought in that wasn’t from an IT focus background can can easily stumble into that. Before we get to roles I’d love to discuss in this this segues into roles a bit. When do you think hiring should happen? of sales teams? Maybe from a revenue or size perspective? Mike, Matt, I love either of you to jump in here.

Matt Lockhart  09:13

Mike and I worked on this many, many years ago for a certain firm here in town. But two things I think, one, how aggressive do you want to set your growth plant the kind of how ready are you and ready in the context of enabling sales organization and having the appropriate leadership and management in place to grow that sales organization the readiness to receive an increased growth and when I say receive, you know, don’t confuse sales with delivery but ensuring that you’re going to be able to keep your quality bar appropriately high because you’re going to have the people and and the support in place. And then I think that the the last piece is, is let’s remember, cash is king. And so you’ve got to make sure that you’re, you’re able to continue to build that sales organization and have those salespeople in place and afford that. Right. I think that some of those are the key pieces. I think that just at a base layer, as we talk about all these enablement, functions, ensuring that there’s those pieces in place, or at least the start of those pieces in place, with the appropriate plan to build upon those things. So that’s kind of how I think about it.

Mike Harvath  10:42

I think with these underlying, you know, infrastructure items, as they’re built, you know, it certainly allows you to scale your sales with I think fewer salespeople, or at least ones that are more effective might be the best way to put it in. So you know, I don’t want to underestimate the need to have, you know, rigorous process and tools and approaches to the market, certainly very important thing. And so it makes it hard to answer the question as a definitive, you know, you need to be the first salespeople are the size 10. Salespeople, and how effective those salespeople should be really, you know, by size is an open question, right. But in general, I would say that, if I had to try to, you know, tie a ribbon on it, I would say that, as you get to that five to $10 million in sales, you need to have a very, not only do you need to have processes figured out, but you need to figure out also how you fortify and vet the team, so that you got very clear direction on process. And, and I don’t want to mitigate, you know, the inner intersection of marketing, because certainly marketing plays a key role here, the more marketing you can put in place to drive demand and provide, you know, additional support to the sales organization, the more efficient your sales organization can be. Any other thoughts on that Matt or Ryan?

Ryan Barnett  12:14

I want to just reemphasize Matt’s point about cost. Salespeople come with commission plans, and are oftentimes some of the most expensive employees a firm will have. So it’s one of those decision points where owners will often carry the sales banner fairly far, and to the point where it can hinder it if you carry it too far. But understand that if you’re starting out and your sub, let’s say two $3 million, you’re likely going to as the owner going to be a very primary salesperson, unless that’s something that’s just not in your bailiwick. If we think about the sales organization, and the team members that are at it, Matt, what’s a good setup that you’ve seen, to look at the structure of an organization within sales?

Matt Lockhart  13:11

Sure, again, kind of depending upon the size of a firm, how many roles in these different functional areas is, but I think that they, what’s important is to think about the functional areas within a sales organization, right? So you got sales, leadership, sales, management, you have business development. And so business development is those that are starting the process of prospecting, qualifying, they’re oftentimes that next step from marketing and or lead generation and so on and so forth. Within the sales persona itself, you’ve got, you know, the traditional hunters versus farmers, right. So if you think about the hunters, these are the account executives that are taking the ball from business development, if you will, and opening up new clients, right, that’s the primary function is open up new clients in a way that enables a hopefully a faster growth path within those clients. And then oftentimes, and this is I think, will be a good discussion, you you also then have account managers, these are the individuals who, you know, sort of take off take the handoff from account executives who do the opening, and they do the longer term grooming of a customer, potentially, you know, leveraging account management for cross selling opportunities, sort of the longer term care and feeding, if you will function within the sales organization. And then the last piece then And this is oftentimes overlooked a little bit, but is sales operations. So, especially within a larger organization that has, you know, multiple capabilities and or multiple products and or a fair amount of moving parts, high velocity, ongoing development of new offerings, and so that sales operate operations function for training, enablement, consistency, ensuring that data is in place, you know, helping to manage pipeline, all of those functions. So, those are kind of the major functions that I see, we see within effective and efficient sales organizations.

Mike Harvath  15:50

Great point, Matt. I mean, I think you summed it up well, all of those functions, as well as having clarity about the offerings and privatization and intersection of marketing are all critically important. I think a mistake, you know, many IT services companies make is they don’t mature the process or the offerings meaningfully enough to really ensure that the sales organization they’re putting in place can be as successful as they can be. And I think by, you know, following this roadmap and making sure that you’ve what we’ll call fortified the sales function in the business, and built these processes thoroughly in these offerings thoroughly, you can be again to, you know, certainly see much higher value and production, frankly, from your sales organization.

Ryan Barnett  16:40

I would note here, it helps to have a role dedicated to making sure that salespeople are ready to sell. And that includes some kind of target account list or some kind of marketing related function that helps bring leads to the organization. The other thing about stress is that it’s very, very rare that you’re going to find someone that is capable of setting appointments, selling an appointment, and being a client manager, those are the sort of really distinct personality types. And to try to jam, all of that all of those critically important roles or functions into one role is is a mistake that we often say, get a salesperson, do you think that’s going to do 100 cold calls a day? Can it go nail a deal done, and then take care of it, one of those three things is gonna get really shorted. And that’s, that can be hindered. The other part is, Matt had mentioned it farmers versus hunters, again, big different personality types, we see a lot of companies really invest in in farmers. And when you could do that for a long time, net new logo generation can go away. And if that happens over a series of years, it can it can be a real struggle to bring someone new into the fold. And while you may have some great recurring revenue, here, hamstrung by future growth with limited sales, so someone that is out there attacking new targets, again, a little bit different personality type, and is something that is critical for long term growth.

Matt Lockhart  18:20

You see this so often. I think that the over especially within IT services, or SAS, I think there’s growing recognition that you can’t pile on too much, or have an expectation that a farmer is going to be doing a lot of account opening. And, and it’s just their specialization in these roles. Again, this is where just having an effective method and process in place, and I think is super important. But if you find those people who are really good at like account opening, and then all of a sudden you bog them down with a lot of account management opportunity, you know, functions or responsibilities. It actually can there’s probably a whole separate podcast around how to pay for incent appropriately, to ensure that you’re getting the behaviors that that you want. But it’s just a real limiter to growth if you’re trying to put all of those functions in under one, you know, individual.

Mike Harvath  19:32

Yeah, I would add that that’s a pretty common mistake, right, that IT services leaders make is they expect the team to do one person to do all the roles effectively. And it’s really very rare that you’ll find someone that can do that. Well. And so, I think that it’d be important and to understand, you know, you got to build an organization that is aligned to the strengths of the individuals for So into your plan, and make sure that all of those discrete roles are mapped out properly and staffed accordingly. And I think if that’s done right, then you certainly can expect to see great success.

Ryan Barnett  20:15

Two things: I’ll ask this one first: It’s a little more tactical, but most of our podcasts are around mergers and acquisition. If someone is going through a process of selling their firm, should they look at hiring more salespeople? Or what should they do in general, when it comes to the sales process in bringing someone on if that sale is starting or pending?

Matt Lockhart  20:40

So I think that first off, every scenario is its own scenario. So keep that in mind. Right. So you can’t you can’t think too much in in just overall generalities here. But that being said, I’ll speak in some generalities. And first off, run your business and do the right thing to run your business each and every single day. But another thing to think about is, are you selling in? Or are you selling out, if you’re selling in, then you are going to be involved moving forward. And that makes it sort of maybe easier to think about the timing around growing that sales organization or or not, I think, another principle generality to think about is when you’re thinking about selling your firm is is what is needed to meet forecast to meet forecasted growth goals. Right? Do you do you have enough capacity in place today, to be able to meet those forecasted growth goals? And, and or not? Do you have gaps, and so you may want to add to the team, and then correspondingly forecasted profit goals as well. So those are some of the things that I think, generally need to be thought of, in the context of when you’re in that readiness to readiness phase before going into market.

Mike Harvath  22:07

Well, I think, you know, when you’re thinking about, you know, making an exit, ideally, you really have to have the sales function dialed in and working well. Right. I mean, I often talk about how things need to be up into the right for you to prepare to sell. And that means that you’re growing, you have a solid growth trajectory, you have a mature sales function profitable. So there’s an increase in revenue and profit. I think if there’s chinks in the armor on the sales side, or the delivery side, or really anywhere in the business? No, it’s likely you’re not going to optimize value as much as you could. Because there’s going to need to be investments made in that sales organization post close. And that’s going to come out and due diligence. And when that comes out, and due diligence, then there’s certainly going to be discussion about, you know, what in the heck, in order for us to get our return, right, if you’re thinking like a buyer, and speaking, like, I’m speaking now, like a buyer, you’re gonna be like, wow, we really need to hire three more salespeople in order to make our number, you know, whatever it might be, I think it’s a prudent thing to do to make sure that your, your fields function, as well as the rest of us, our business is running well, and that you’re achieving results that are, you know, meaningful. And so, you know, take the time to invest and making sure that the function is working, that the team is, is producing, and then that will certainly help you optimize value. I think making last minute changes in the business, from a cost perspective that may not have proven out yet, pursuant to an upcoming transaction probably isn’t, isn’t prudent to you know, really achieving, you know, your ultimate goal. So, you know, every situation is different, as Matt points out, so I don’t want to make the sound like it’s a one size fits all deal, because it’s certainly not. But it you have to be aware that if a buyer is looking into buying your business, they certainly, you know, most buyers don’t want to come in and have to make material changes to things like sales, the sales organization, if they can help with it makes it much lower risk and easier for them to model how they’re going to be successful. If that’s, you know, already in place and not the case.

Ryan Barnett  24:38

Sounds good. Just to kind of wrap this up and bring us home here. In general, we talked about a lot of things of when to hire, the role of the CEO and the sales process, kind of the teams and the type of teams. Matt, let’s maybe start us out and you can hand it off to Mike to wrap it up. But again, what are what are two or three things just To summarize what we’ve had here to make as a sales team, in a sales effort really successful in an IT services company?

Matt Lockhart  25:10

Understand your differentiation, and map that differentiation to the right targets. And, and make sure that everybody is is speaking a common language about that. And understand kind of all of the functions that need to exist that even if they’re in a, you’re not resourcing them fully, but understanding how you are putting those functions in place and enabling, and then get ready for the grind. Sales is a grind. I mean, it’s a numbers game, and it’s a grind. And those that embrace the grind tend to be the ones that win. And because they they’re out competing and, and working hard, and they’re excited about their customers, and they’re excited about their growth. Those are the things that I started thinking about day in and day out as it pertains to growing your business.

Mike Harvath  26:10

Yeah, you know, I would echo that sediment along with, you know, oftentimes we see particularly technologists that have started businesses, you know, sort of have a, you know, especially if they’re technical tend to have a little bit of a, you know, sales is a dirty word thing, right, necessary evil. We haven’t been as successful as we’d like and sales because of, you know, blah, blah, blah. And I think that’s an underlying bias that, you know, owners and leaders and IT services companies, if they have it really need to address because there is a, an approach, as we’ve outlined in this podcast to be very successful sales and IT services, there’s plenty of firms that have effectively done on that. But you have to be committed to you know, really dialing in that, that function, that process, in invest in the right, you know, tools and people, you know, the old, you know, people process and technology argument here is really important. And ultimately, be prepared to, you know, as Matt outlines, you know, go after the market aggressively. And, and, and you’ll achieve those results.

Matt Lockhart  27:38

I think it’s that time, Mike. It’s that magical time.

Mike Harvath  27:44

It’s that magical time to tie a ribbon on it. I appreciate everyone’s input here. Matt. Ryan, your thoughts on this? It’s an interesting and important topic. Certainly if you’d like to learn more, I would encourage you to visit our website at revenue rocket.com. Or feel free to reach out to us at info at revenue rocket.com with your questions, and we’d be happy to answer them. So we will tie ribbon I come visit next week. We will be exploring and unpacking additional m&a topics aggressive strategy topics for tech enabled services firms worldwide. Thanks for tuning in and make it a great week.