Every week, more and more companies are doing big layoffs. As news of layoffs continues, many are left wondering what happened and how to shift course. Many startups missed 2022 revenue goals and are forecasting slower growth for 2023, especially compared to the explosive growth of teams and revenue during the Boom of 2021 and early 2022. 

In this week’s episode of CRO Confidential, Founders Fund Investor Sam Blond sits down with the SVP of Sales at Modern Health, Hannah Willson, to discuss how companies can adapt to the current sales environment and how to correct course when you don’t have a right-sized sales team. 

When Buyers Change Within An Organization

Over the last six to nine months at Modern Health — a comprehensive mental health benefit sold to employers — Willson shares how they had to shift how they sell due to buying decisions shifting from a functional lead like the Chief People Officer to a CFO and sometimes a CEO. 

Essentially, this is an entirely different buyer within the organization; as such, they have to be handled differently than your sales team may be used to. 

On top of that, sales teams must still communicate with those functional leads, who then have to try and sell up internally. As you can see, this gets tricky because those functional leads aren’t part of your sales team — or even your company — and they’re the ones doing the pitching. 

This requires a change in messaging. “People are still definitely buying. We just have to change the way we approach it,” shares Willson. 

Adapting Sales Strategy In This New “Normal”

It requires more friction to get deals done today compared to the hay days of 2021 and early 2022. This friction exists because additional stakeholders enter the buying process and block the deal. 

So how do you overcome this hurdle and close the deal? 

By changing how you talk about things. When selling to a CPO, they understand the overall value of an offering to their business. But does the CFO, who has different goals and priorities, have this same understanding? 

You have to equip your functional leads with the conviction and knowledge to sell to the CFO, and to do that, you have to figure out what the CFO cares about.

For Modern Health, HR leaders experience a lot of pressure coming down from the top. As a sales team, it’s your job to get specific for them. 

  • How should they present the offer to a CFO?
  • What questions are they going to get from stakeholders?
  • What kind of pushback would they get?
  • What is the cost savings?

But CFOs aren’t a monolith. They aren’t hiding behind a curtain, making decisions solely based on dollars. So it’s important to demystify the role of a CFO. 

How do you do that? 

By talking to them.

Most companies have a CFO or someone in a similar role. Ask them questions. Learn what they need to make decisions. Many CFOs ask functional leaders what resources they need, which is why creating an advocate out of your leaders is imperative. Even if they aren’t making the buying decisions, they can be critical to pushing through those decisions. 

What Sales Team Size Is The Right Size?

Many companies hired loads of people during 2021 and early 2022. They had to in an attempt to keep up with how quickly things were moving. As things slow down, it’s natural for the dust to settle, showing you which leaders are pulling ahead and where dead weight needs to be cut. 

Companies like Modern Health are scaling revenue significantly. But instead of adding more account executives to increase productivity, they’re looking at every area they can invest in to boost lead generation and earning potential and every area they can divest in that isn’t working, including removing the lowest-performing folks. 

Layoffs don’t necessarily mean a company is struggling. It could mean they overhired, and now it’s time to “sharpen the knife” and create a stronger team and business. 

Scaling sales teams or revenue is more challenging than plugging numbers into a spreadsheet. Over the last few years, adding more team members sometimes diluted an existing team’s success, leading to diminished efficiency and revenue and eventually to layoffs. 

So how do you determine the right size team for your business? 

  1. Leads.

    Do you have enough demand to support more salespeople? Look at your reps’ calendars and see how many customer calls they take daily. If it’s overflowing, it’s a good test for adding more people to the environment.

    If you hire more people when reps are starving for leads, sales will dip because you’re spreading limited leads to less-tenured representatives with lower conversion rates.
  2. Revenue generation.

    Do reps source their own revenue, and how much is each one generating on their own through outbound? At Brex, they set an expectation from an early stage that 50% of closed revenue was outbound from AEs.

    If a new hire mirrored the existing environment, they would generate more revenue because they sourced their demand and closed revenue through outbound. So look at the data. Determine where revenue is coming from. If it’s outbound through AEs, you can expect that to continue while scaling your team.
  3. New hire success.

    This one’s more subjective. Is your new hire set up for success? Would an average person be successful? Determine that by asking, “Is the majority of the team over quota?” If most of them aren’t, you need to figure out why you’re trying to hire more people into an environment where the average person can’t succeed. 

If you hire good AEs, they want to be the best. So it’s critical to get these three steps right. You don’t want to hire salespeople in a demand or lead-poor environment. You’ll get fewer sales. So look at those calendars, cut the bottom-performing percent of your AE team, and give those limited opportunities to performers with higher conversion rates. 

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