The Biggest Problem With Mediocre VPs? They Spend All The Money

I used to think the biggest problem with mediocre VPs was the mediocre folks they hire.  That B players hire C players, B+ players hire B- players, etc.  This is certainly true. The best folks, the “A players”, will only work for other A players.

But as time has gone by, I’ve realized in SaaS, mediocre VPs do one thing even worse than hire a bunch of B players under them (which is bad enough and all of whom will likely quit or need to be managed out later):

-> They spend all the money.

What do I mean?  When mediocre VPs fall behind their plan:

  • A mediocre VP of Sales tries to hire their way out of a miss.  Hiring 2x-3x more mediocre reps than you’d really need.  With almost none of them hitting quota.  That burns so much cash.  Your sales productivity quickly plummets.  Sales done well is accretive — if a rep brings in 3x-5x what they take home.  But as the sales team dips below closing 1x what they take home, a sales team becomes a huge cash-burning machine.
  • A mediocre CMO or VP of Marketing tries to spend their way out of not generating enough leads / opportunities / etc.  I see this again and again.  A mediocre CMO or VPM comes in and just doesn’t know how to accelerate growth.  So they spend more. On people and stuff that just doesn’t work.  A struggling CMO almost always asks for even more budget.  Often, to spend on things that didn’t really work the last time they tried them.
  • A mediocre VP of Customer Success doesn’t quite spend it all the same way, but they build a big team that never drives down churn or NRR up.  This turns customer success into a cost center that frustrates everyone in the company.

I can’t tell you how many times I’ve seen this.  And then all of a sudden, instead of, say, 18-20 months of cash runway … you have 9.  And you maybe even have less once by the time that mediocre VP quits or otherwise moves on (which they almost always do).  And you’re in a tough spot then.  With a bunch of reps that can’t sell.  A bunch of marketing programs that didn’t perform or create real pipeline.  Etc. etc.  And not enough cash runway to really fix things.

When you aren’t 100% sure you’ve hired an amazing VP … at least just monitor this.  If nothing else, make sure their spend stays on plan.  Much more so than the best VPs, who tend to be very thoughtful with their budgets.  And whatever you do, don’t let them talk you into spending more than makes sense.

They are just trying to save their own neck.  When they don’t know what to do.

Published on November 9, 2021

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