Library Required reading How the best reps sell
Pay Your Reps for the Customers Who Stay
Mark Roberge built HubSpot's sales team from its first hire to more than $100 million in run-rate revenue, and he ran hiring and comp the way an engineer would. The part to copy is the comp plan, which moved from paying on new signups to paying on customers who stayed.
Mark Roberge · The Sales Acceleration Formula · 2015
What it is
Mark Roberge joined HubSpot in 2007 as its fourth employee and first sales hire, an MIT-trained engineer who’d never worked in sales. Seven years later HubSpot crossed $100 million in run-rate revenue.
He hired by data. In a 2014 interview he described grading new hires on 12 criteria, then checking, once he’d hired 15 or so, which scores actually predicted success. Coachability, curiosity, prior success, intelligence and work ethic came out on top. The list isn’t the point, though:
“The ideal sales hiring formula is different for every company, but the process to engineer the formula is the same.” Chapter 2
What you’ll take from it
The part to take is the comp plan. HubSpot ran three of them in its first six years, and Roberge says most of the company’s big strategic shifts were carried out by changing the plan.
“The first plan paid each salesperson $2 upfront for every $1 of monthly recurring revenue they brought on.” Chapter 8
That was at about 100 customers and barely $300,000 in run rate. Reps were rewarded for customers who stayed at least four months, and HubSpot soon grew to about 1,000 customers. Then many of them started leaving, because they’d been given the wrong expectations. So Roberge tied commission rates to customer retention, and the third plan rewarded reps for customers who signed up for a full year at a time.
He was already judging reps this way in 2011, when he told David Skok that one of HubSpot’s three measures of a rep was the lifetime value of the customers they signed, because
“sales reps can close deals by selling to the wrong customers or by using sales pressure tactics. However those deals will usually churn fast.” Interview with David Skok, For Entrepreneurs, November 2011
Where it shows up in your numbers
The first plan paid on a count. A customer who’d cancel in month five paid the rep the same as one who’d stay for years. That’s Kerr’s folly of rewarding A while hoping for B, and the comp research in the library, from quarter-end deal timing to bonuses, shows reps responding to exactly what the plan pays for. Roberge didn’t fix it by counting harder. He moved the payout toward what the customer turned out to be worth.
So work out what a rep on your plan earns on a customer who cancels in month five, and on one who’s still paying in year three. If they match, you’re paying on a count. Hold part of the commission until the customer stays past a set point, and review each rep on the retention and value of what they sold, by tier, a year later.
Next on the shelf Peter Fader, Customer Centricity