advice needed for hiring a sales guy

taustaus Posts: 2subscriber
edited July 2016 in Sales
We are a small startup of three. We are considering hiring a sales to boost our growth in the short term. Can someone share how they decided that hiring sales was a good idea?

Our burn rate is around 9k. We are sure of 50k revenue for the coming 4 months (and have around 185k in the pipeline). We hope to have a revenue of 110k if 30% of our pipeline is approved.

So we burn 36k in coming 4 months.
We are sure to be able to bill 50k in coming 4 months.
We might be able to bill 110k in the coming 4 months.

We are talking to sales people to hire a guy. He will cost us around 5k a month (and 20k in the coming 4 months). He is saying that he things a target of 100k is realistic (of new business) in 4 months.

Couple of sales stats: Our average deal value is 20k. We try to engage with our target audience (local governments). For every 3 that invite us, 1 asks us for a quote. For every 2 quotes, we close one deal. Our market size is around 300 local governments and only 15 are currently using our product. Our product can easily be applied to other sectors but same sector gives us more margin for our consulting business.

Best case (110k revenue):
- If we don't hire him, we will have: 74k ebita
- If we hire him but he doesn't deliver, we will have: 54k ebita
- If we hire him but he does deliver, we will have: 174k ebita

Worst case (50k revenue):
- If we don't hire him, we will have: 14k ebita
- If we hire him but he doesn't deliver, we will have: -6k ebita
- If we hire him but he does deliver, we will have: 114k ebita

We need the money to bootstrap our business for the coming year and go from a consulting business to a subscription business.

What would you (as startup founders) advice?

Comments

  • Charlie PCharlie P Posts: 89subscriber Silver Level Member
    Taus,

    First off. Welcome to the forum! I hope that you find value in your time here.

    Okay, I'm looking at some of the numbers that you are putting out and am a little concerned with your future prospects. You said that your market is 300 local governments. If you get all 300 of them to invite you that will lead to 100 quote requests. That 100 quote requests will lead to 50 committed clients for your product or service. The average deal is 50k. That means that if you get invites from all 300 in your market then you would hit roughly 1 mil (which is a good distance above the stated goal of 174K on the high end). So, what concerns me about your question is, How long will it take to either get or lose these 300 entities? Once they have either been sold or turned it down, what would your salesperson do? Is there room to move into new markets? Even only doing one per business day that would allow the salesperson to reach 260 in one year and you already have 15 on lock, so that only leaves 25 for the following year.

    Possible solutions to this problem are to bring on another person who is good at sales, but would also make a good consultant in your field. This would allow them to contribute in multiple ways and they wouldn't have the prospect of working themselves out of a job.

    Also, assuming that the 15 you currently have as clients are running at the average of 20k per year, that puts you at 300k. With that much coming into the bank, I'm wondering why you are having money issues when there is only three people. As owners, you may want to look at the expenses and see where it can be trimmed down. I'm not saying you all should go without any money, but the business should always come first until such a time as it is fully self sufficient.

    I'm guessing you have already worked through a lot of this, but sometimes it takes an outside observer to think from a different angle. And please understand that I am not trying to be mean with my questions or comments, I only wish to help you through your questions and help you take your business to the next level.
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