Hi friends - We’re wrapping up the topic of sales hiring (for now) by discussing a very crucial element…managing your expectations as the founder.

Specifically, I mean managing your expectations about how fast they will close their first deal(s).

When can you realistically expect to see an ROI on your new hire? And what leading indicators can you look out for?

Let’s unpack it.

Sales hiring: Expectation management & leading indicators of success

Timeline variables to consider

There are a number of variables we need to consider before we can answer the timing/ROI question, including:

A simple formula

Sales Ramp-up Time = Onboarding Time (GTM Maturity + Candidate Alignment) + Sales cycle length

So let’s pull this all together.

As an example, let’s assume -

• that you do, in fact, have 80%+ of what I listed on my pre-hire checklist; you’re prepared (Score = 1 month)

• the rep is highly aligned with your Ideal Candidate Profile, a near perfect match (Score = 1 month), and

• your average sales cycle is 6 months

Then, I’d assume your rep to close their first deal in ~8 months (1 + 1 + 6 = 8).

However, if your GTM maturity score or ICP alignment score is lower, add 4 months (or more) to that expectation (~12 months+ to ROI).

This is why it’s SO so important to 1) prepare for the hire - set them up for success, and 2) spend the time to profile and hire the ideal hire for your product/customer/sale.

The gut check

If they haven’t closed a deal in 1.5 sales cycles…it’s unlikely to get any better without a change to your sales process, product, or the person.

You’ll need to take a hard look in the mirror to determine if it’s you (lack of preparation, infrastructure, or PMF), or if it’s them (either candidate alignment or a performance issue).

The leading indicator to measure

However, there is a leading indicator we can use to figure this out faster than 1.5 sales cycles.

After the appropriate onboarding ramp time has passed, 2 months per my earlier example, I’d set very clear activity expectations for your new hire.

Sales take time to close - we can all appreciate that. But activity (or pipeline creation) is a leading indicator of our probability of closing revenue.

Activity = # of net new deals/opportunities created or first meetings booked

Calculating an activity metric to hold your reps accountable to

To calculate an activity metric or standard to hold your reps accountable to, we’ll need three basic ingredients -

1. A quota / revenue goal for the rep

2. Your ACV (average contract value)

3. Your average close ratio (% of deals you close)

An example:

Let’s say you gave them an annual quota of $500k that kicks in month 3 (after the allotted onboarding ramp time). For easy math, let’s say your ACV is $50k.

That means they’ll need to close 10 deals in 12 months to hit their quota ($500k/$50k).

Now let’s say that your average close ratio is 10%. If you don’t know your average close ratio…that means you aren’t totally prepared…but 10% is a conservative number to use if you don’t know.

That means they’ll need to create 100 net new deals or opportunities throughout the year to close 10 (10% conversion).

Now, if we take 100 deals / 12 months = 8.3 deals/month or 2-3/week.

THAT ^ is what you start to measure and hold them accountable to starting in month 3. If they aren’t able to consistently create 8.3 deals/month by month 3-4…Houston, we have a problem.

THAT ^ is the leading indicator you look at to know sooner than later if something ain’t working - if the math ain’t mathing.

And again, the problem may be you…and it may be them. But there is, in fact, a problem to address.

Hope that was helpful! See ya next week. 🙂 

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