A Modern Guide to Building a Sales Department
As you may have guessed, I will be talking about sales again. This time, however, I will focus specifically on the common and more exotic types of modern sales departments and individual roles within them.
In contrast to a surprising variety of team topologies in production departments, sales teams have always used to be somewhat plain and simplified. With time, however, it became apparent there was no reason for it to be like that. New approaches to doing business in IT and the adoption of new customer engagement techniques brought about some major tweaks in the sales world.
I assume that if you are reading this article, it probably means one of the following:
- You’ve been reaping the benefits of word-of-mouth marketing for far too long and now feel that the time has come to start selling the right way with a dedicated sales team;
- You already have a sales team but feel that its performance could be improved in one way or another;
- You have a solid team yielding solid results, but are curious whether there is anything out there that you haven’t tried yet.
Whether it’s A, B, or C, it never hurts to take a look around and see what your options are.
Let’s now try to wrap our heads around some of the more recent approaches to building effective sales teams.
I suggest that we start with roles because roles in sales are a bit of a mess. Every company goes out of its way to come up with a brand-new, fancy-sounding title for sales reps and assign an arbitrary set of functions to it. The problem is, there is no industry standard for sales roles and nothing is carved in stone.
On the structural side, sales departments have traditionally been centralized and decentralized, allowing sales reps different degrees of freedom in terms of choosing the direction of their efforts, their target market, their marketing materials, and such.
Now, if we want to take a deeper dive into sales roles and models, let’s take a look at the typical (very generalized) sales model that can, in this or that form, be applied to any company with a sales department.
As you can see in the illustration above, the sales process can have several levels of maturity and complexity: from a simple client-vendor relationship to a full-fledged sales machine that incorporates elements of account-based engagement, R&D activities feeding back to client development and presales, as well as a fully-functional lead-generation team.
Let’s do a quick run through the default list of sales stages that your process probably has:
- Lead generation (inbound, outbound, marketing campaigns, etc.)
- Lead qualification (marketing prequalification, sales qualification)
- Response generation (RFX) and negotiations
- Deal closing
- Client onboarding/product delivery
- Client service management (account management)
Each of these steps requires the involvement of different people acting in different roles. Let’s take a look at them, as we’ll be using them a lot throughout this article.
Market Development Representative (MDR) — a person whose sole responsibility is to produce Marketing Qualified Leads (MQLs) and add a human touch to early-stage interactions with prospective clients. Raw, unqualified leads usually come from various sources, the key one being the marketing department with its channels.
Sales Development Representative (SDR) — this person uses various techniques and approaches to initiate the first contact with qualified MQLs. In smaller companies, this role is often merged with that of a Sales Representative.
Sales Representative (SR) or Account Executive (AE) — the person who engages the contacts received from an SDR and conducts a series of meetings/calls with stakeholders on the client’s side to convert the sales opportunity into a deal.
Onboarding (ONB) — this is fairly self-explanatory: the client is granted access to a product and trained accordingly or a development project is kicked-off and delivered over time.
Customer Service Manager — takes care of the administrative aspects of the client-vendor relationship. This role becomes especially important if the team doesn’t have anyone dealing with paperwork, contracts, and invoices..
Account (Development) Manager (AM, ADM) — a very important role, especially in the enterprise sector. This person’s goal is to establish a close, lasting, productive relationship, both on the business and personal sides. Larger companies will typically have dedicated AM’s for major accounts or buckets of accounts. Smaller ones with no AM service will delegate these functions to their SR’s.
Occasionally, you may also encounter more exotic roles in sales departments, such as a dedicated talent acquisition manager, a sales coach, or even an administrator taking care of the team members while they focus on their primary goals.
The roles above are more of a generic set. In reality — and it’s based on my personal experience of many years — these structures are often less complex and naming is somewhat different:
- Biz Devs promote the company’s line of products and services, conduct ongoing market analysis, develop partnerships, and connect clients with each other for the common good.
- Sales development reps / lead generation specialists look for prospects.
- Sales reps / account executives / closers process requests, generate responses, and close deals.
- Customer service representatives / account managers work with existing customers to retain and expand the business relationship.
That’s a lot of titles, roles, and functions, I totally agree. But you will definitely need to know them to be able to understand what your situation is and what changes you will need to implement to build a sales team structure that perfectly aligns with your business model and company size.
And since we mentioned a sales team structure, let’s talk about your options here.
Types of sales teams
If you do some research, you’ll find that the most popular models of sales teams are Island, Assembly Line, and Pod. Let’s take a look at each of them in more detail.
The island is arguably the most commonplace sales structure. It’s your best pick for a new company or sales unit thanks to its scalability and ease of management.
A clear hierarchy with 1–2 levels of management on top of a varying number of completely autonomous sales reps, each covering the entire range of sales-related activities: from lead nurturing and qualification to deal closing and account management.
- Quick to implement
- Easy to manage
- No need for complex sales processes
- Shorter sales cycles thanks to lasting relationships with clients
- Higher customer loyalty
- KPI tracking is challenging (everyone is playing their own game)
- Competition between sales reps can go toxic
- When scaled too much, process alignment becomes an issue
- Sales rep lock-in (losing a rep leaves you without a client)
Summary and recommendations:
If you go for the island model, make sure to keep an eye on individual performance metrics. As is often the case with multi-actor systems, the weakest performers are the ones dragging you down, so focus on your weakest reps, not the champions. Also, try to identify the best individual strategies and apply them across the board.
On the compensation side, make sure your reps have a decent base and commissions. The base pay should be commensurate with that of an mid-level developer, otherwise the motivation will not be on par with your expectations and performance will suffer.
As the name suggests, this model works similarly to a production line where the output of the preceding process is the input to the subsequent one. It is also known as the “hunter-farmer” approach to building sales departments where hunters are those who “track down” and “bring home” new clients while farmers take care of those already in your “corral”.
In this model, each step of the process is handled by a particular person or group of people who fulfill a certain function (and this function only).
- Ease of tracking and forecasting at each stage
- Concentrated expertise at each process stage
- High visibility of the sales pipeline
- Higher overhead — the process requires a large team
- Client handover between stages can be burdensome
- Leads from the same client may be processed by different sales reps and account execs, causing a lack of consistency and client’s confusion
- Deal success is a shared responsibility, which creates room for blaming and finger-pointing in case of a failure
Summary and recommendations:
The assembly line is a popular sales department topology that is often used by SMB’s and SaaS companies. It’s very straightforward and has a very distinct division of labor between the members of the team, which makes it easier to track the movement of leads and opportunities through the pipeline (Kanban style) and measure progress at every step of the way.
The most notable flaw of this model is its poor scalability. It’s a fairly rigid model and the output/input for each stage should be balanced for a steady cadence in your sales pipeline. If you want to increase throughput, you just need to hire more managers, but this process has obvious physical and financial limitations.
Sales pods are the most exotic type of the three and the most promising one for many organizations, SaaS teams in particular. In essence, they are miniature sales organizations within a sales organization, little assembly lines tailored to a particular industry, company, marketing campaign, geography, client cohort, or any other specific purpose.
Pods are a perfect choice for companies relying on account-based engagement and marketing. When you need to concentrate on a particular solution and sell it with pinpoint accuracy, pods are very likely to work better than other options. Pods can be organized in any way you believe works best for your situation.
What you see above the most typical example of a sales pod. An MDR and SDR, each responsible for their own channel, work with two account execs, or closers. However, depending on your business model and your typical client profile, the pod design can be modified. Check out some examples below:
As you can see, depending on how you generate leads, sell your services and to whom, the balance can be shifted towards having more MDR’s or fewer AR’s, or leaving just one MDR or one SDR. As I said, pods are super-flexible, so you just need to find the right balance of roles to give you stable, predictable throughput with no “kinks on the hose”.
- Easy to replicate and scale
- Self-sufficient, close-knit teams working on the same goal
- Concentrated expertise within every pod
- Lower risk of error due to cross-checks within a pod
- Individual motivation is an issue
- Positioning errors result in low sales
- No competition between sales reps may be demotivating
- Any friction in a pod disrupts the work process
Summary and recommendations:
Pods work best for large organizations with equally large client bases (over 3000 potential clients) where certain segmentation is necessary for achieving optimal results. If you feel that the combined number of your clients is up to 1000, pods could be an overkill. Mind that the optimal number of people in each pod is between 3 and 7, otherwise they may become hard to manage and lose effectiveness.
By now, you should have a pretty clear understanding of what you might need for your business. However, a particular sales team structure and people hired/assigned to fill it won’t cut it on their own. You need metrics to measure their performance and make adjustments on the go.
Picking a suitable sales team structure goes hand-in-hand with defining the right KPIs. There is no universal recipe here and there have been no major discoveries in this area lately. Based on your market, processes, needs, ambitions, and other parameters, you may want to browse the catalog of existing metrics and pick the ones that you feel are the most relevant.
So what are the KPIs that are worth tracking?
Overall revenue — per year, quarter, month, week. Know your revenue at all times. Three in the morning counts, too.
Win rate — a very important parameter for any selling organization. The number of contracts signed to the overall number of qualified opportunities you processed. Apparently, the higher it is, the better, but 20–30% is an excellent result.
Revenue per product/product line/service — it’s unlikely that you sell a single product. Most probably, you have extra services or products that go along with the main one. It’s useful to know where you are losing and where you are winning.
Revenue per account — you want to keep a healthy balance between revenue streams in your portfolio (up to 20% each). A situation where a single client accounts for 80% of your overall revenue is 1) a dangerous case of client lock-in where losing this client may jeopardize your entire business and 2) a loud signal to you that your sales team is not doing its job.
Customer acquisition cost (CAC) — that how much you spend to get a contract signed in relation to your revenue from this account.
Average deal size — the total estimated value of all signed contracts to the total number of clients. Use it as a macro-parameter of your business and something that you should always strive to increase.
Lead time — shows how long it takes, on average, before a lead turns into a contract. In other words, a sales cycle. Use it for setting goals for your sales reps.
Lead status change period — indicates how long each lead stays in the pipeline before its status changes. Knowing it allows you to streamline processes at every stage.
Number of client touches (calls, emails, meetings) — applies to won and lost opportunities and allows you to add uniformity to the sales funnel (and come up with better-balanced sales plans).
Lead count growth — the number of new potential clients. It’s something that you should be looking at in the context of the future. The key parameter to watch here is the number of acquired leads turned into new business. As mentioned before, the industry standard for the win rate is between 20% and 30%. If you are considerably lower than that, you should be adjusting the work of the sales team. If you are above that, you should be boosting lead generation in the marketing department to balance input and output.
Conversion (MQL> SQL) — lets you see how many leads are lost/closed at each stage. Knowing that can help you improve your funnel dynamics.
The most important thing, however, is that these numbers should not be calculated just for the sake of it. They should be updated regularly and should be visible to the entire team so that your people could see their progress towards set goals. If you are not 100% happy with these default KPI’d, feel free to come up with your own variations.
Here is a very rough plan:
- Set primary and secondary company goals (boosting your monthly sales (secondary) inevitably leads to higher yearly sales (primary))
- Define the parameters and metrics that directly lead to meeting secondary and primary goals (e.g. more calls with prospects increase the number of SQL’s in your pipeline).
- Lay out a roadmap for additional activities that will support the initiatives above (e.g. making more calls requires more MQLs and therefore more efforts on the marketing side, potentially involving investments in new lead generation channels).
- Set your priorities according to your strategy (right now, onboarding more clients may be more important than increasing the average deal size, but things may change in the future)
- Stick to the Plan-Do-Study-Act model to constantly assess your progress and make valuable adjustments to your business processes.
It’s a lot of information, I know, and it will take you some time to start executing on this plan. To make things easier, start with analyzing your current situation, then find a model that seems to be the best match. Check whether you have enough people in key roles and whether the roles are well-defined. If not, make new hires or reassign people internally. Finally, review your KPIs and implement new ones, if necessary.
If you still have questions about team structures, roles, or related matters, please don’t hesitate to reach out to me. I am always happy to share my knowledge and make new connections.