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Unfortunately, no data on that topic answers how many companies are overinvesting in their sales teams. However, we could take other data points as a proxy that tells us that there is a permanent broken link between product, sales enablement, tech stack, and sales. This prevalent problem inhibits organizations from investing with the right timing or fixing the bad decisions made by their predecessors. In its latest report, Gartner suggests that despite CSOs’ increased investments in technology to improve sellers’ productivity, 49% of sellers feel overwhelmed by the tech required to do their jobs. Overwhelmed sellers are 43% less likely to attain quota. In another survey published back in 2022, data suggested that 54% of sellers were looking actively for a new job, 20% of them that replaced the departed sellers were more expensive, and hiring was slowing down the ramping by 17%. To retain your 100% hiring plan, you must hire 110% throughout the year. Your sales team is one org among many that will feel the burden of that inefficient tug-of-war between attrition and ramping process (that costs a lot beyond a certain attrition level).
Yes, conditions have changed over the last two years, but the core of the problem remains. The sales process is more complicated due to the complexity of the products or tools deployed and asked sellers to operate with. This leads, in both cases, to over-investment in that category. AI is not always a rescue to all these problems.
As always, this problem bubbles up in several layers in these stats. One fundamental issue is that the product the sellers should be selling has a complicated or complex nature. Engineers are not designed to be sellers, although sometimes they are excellent in that the vast majority solve problems without considering whether this tool is easy for someone to organize a walkthrough or a simple demo. This leads to compartmentalizing the sales process, creating multiple, highly specialized roles that will likely have different job titles, job codes, and salary ranges. These approaches generate another cost bubble within the organization due to the lack of proper design around the product users. I'd say this. Even the best product won't be sold if your sellers can't explain that to your prospects or customers.
The second problem is often within product marketing or sales enablement. Two organizations rarely working in concert are key connections that will help mitigate the risk. If both teams' efforts do not translate to good ramping or training materials, the problem will persist and likely deepen the spending with a continuing struggle to hit the top line.
The third problem is the number of randomly selected GTM tools that do not necessarily help you get the right outcome. Most of the company's tools in the early stage or even a late-venture organization are a conglomerate of suggestions made without thinking holistically about what team needs to execute that. Architecture in this is not well thought out or even analyzed. The sales team comes, says we need this or that, and here we go. 6 months later, these people leave, and the rest of the team is reminded of the 12 or 24-month contract using something that is not helping at scale.
HIght-touch vs low-touch model. These two simple concepts help early-stage companies build their approach to lowering the risk of over-investing. I must state the obvious that not every case is the same, but I think it gives the idea of where this can go if you choose one of these two paths.
A high-touch sales model will require a high level of person-to-person interaction between salespeople, prospects, and customers. This includes regular touchpoints, personalized demos, and customized support/onboarding. If your product fits the Fortune 500, this model is for you as you will likely try to use it for high-value customers while selling complex products. For the same reason, it requires more resources and time investment, which can ultimately lead to higher customer retention. This can lead to better customer retention and satisfaction. Churned customers will be hard to compensate for, but you can bring extra revenue with the higher upsell.
On the other hand, the low-touch sales model will characterize the minimal sales-to-customer interaction from first contact to conversion. You can start with the credit card transaction and PLG-like approach, including self-service options during the onboarding, automation, and marketing efforts. It's often used for lower-priced products or those with tiered pricing, requiring fewer resources and can be more easily scaled. Focuses on driving traffic and conversions through optimized marketing. This model could be used as a starting point while you build a strong connection with the product team and product marketing before hiring a large sales group.
Conclusion:
You must be aware of your limitations when you are a founder or even an executive in a mid- or large company. Great ideas are always welcomed, but they are often very expensive. Inevitably, you must choose between ideas that balance the risk and return of investment and match your abilities to execute. Another complexity comes from the resource allocation process, which must be split between sales, marketing, and support. Your sales model will decide how you will bet on your customer experience. The chosen model significantly impacts the customer's journey and experience with the product. Low-touch models are generally more scalable, while high-touch models may provide better results for complex or high-value products with a higher upside. The first is more transactional, and the second is more consultative. The second is more capital intensive, so option one is best for you if you don't plan to take a big round with your VCs. The good side is that if you have proven your ability to close more significant deals, you should expect a higher upside for these deals. A similar dynamic would apply to the churn rates predominantly impacted by the product fit and price point for their targeted market.
The real conclusion is that you likely want to avoid the macho or large ego approach, collecting a strong signal on the demand for your product. From this perspective, creating thresholds with the expected or anticipated investments can help you plan your next step in mitigating the risk of overinvesting or exposing the company to higher cash flow issues. To execute this approach well, consider starting with a low-touch model and gradually incorporating high-touch elements to target larger accounts or more complex use cases.
Empower your executives to restrain themselves, think through, and remain open-minded. They must understand the limitations at any stage of the company's development. Remember, it's like with stocks trading. If you lose money, there is no guarantee or return policy. It's consumed and stays with you. Many successful companies use a combination of both models, tailoring their approach based on customer segmentation and lifetime value.
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