Mis-hiring your VP Sales: The real cost

Hiring the wrong VP of Sales can be a costly mistake for a SaaS startup. The cost of hiring and training a new executive, coupled with the loss of sales and disruption to the team, can add up quickly. So what are some of the real world costs that are involved if you get this crucial hire wrong?

Why is this mis-hire so expensive?

Firstly, a VP of Sales is responsible for leading and managing the sales team, as well as setting and achieving revenue targets. If the VP of Sales is not up to the task, it can have a ripple effect on the entire sales team, leading to missed targets and decreased revenue. This can not only damage the company's financial performance, but also its reputation and credibility in the market.

The VP of Sales will typically play a crucial role in building and maintaining relationships with key clients. If they are not capable of effectively managing these relationships, it can lead to the loss of high profile clients, which can have a significant impact on the company's revenue.

This role is also often a key member of the company's leadership team and is involved in important strategic decisions. If the VP of Sales is not a good fit for the company culture or lacks the necessary skills and experience, it can create tension and disrupt the overall functioning of the organization. In such cases, the CEO may have to spend a significant amount of time and resources correcting the situation, which can be a major distraction from other important tasks.

---

“70% of SaaS organizations' first VP Sales hire doesn’t make it to 12 months. Its one of the most devastating mis-hires in start-ups” - Jason Lemkin (SaaStr Founder and CEO)

---

Hiring the right VP Sales can't be that hard

You have been on a role with hiring new talent, your sales team is thriving and revenue is on the up. How hard can it be to hire a VP Sales to make sure things keep trending in the right direction? That’s where the data might shock you.

Jason Lemkin (SaaStr Founder and CEO) said “70% of SaaS organizations' first VP Sales hire doesn’t make it to 12 months. Its one of the most devastating mis-hires in start-ups”. Did he say 70% don’t last a year!? If in any other situation within your business (or life for that matter) you were told there was a 70% chance you would get it wrong, would you still just go for it and hope for the best? Probably not. In all likelihood you would seek outside guidance on how how to avoid becoming another statistic.

How much are we actually talking here?

You might be asking yourself “how much are we actually talking here?”. Well according to a study conducted by Dr. Bradford Smart (Topgrading Founder & CEO) “The estimate of a bad hire ranges from 5 to 27 times the amount of the person’s actual salary.” If you look at the image below, you can see an eye watering $560k+ for mis-hiring the wrong sales rep. Now add in the extra cost of hiring a Senior VP Sales, who will be overseeing all of your sales reps… Yikes.

Let's look a breakdown of where this huge number comes from:

1. Hiring and onboarding costs: Recruiting, interviewing, and onboarding a new executive is a time-consuming and costly process. The startup will need to pay for recruiting fees, travel and relocation expenses, and potentially a signing bonus. Onboarding a new executive also takes time and resources, as the team will need to get the new VP up to speed on the company's products, processes, and culture.

2. Loss of sales: A VP of sales is responsible for driving revenue and growing the business. If the VP is not performing, the startup will likely see a decline in sales. This can be especially damaging for a young company that is trying to establish itself in a competitive market.

3. Negative impact on team morale: If a VP of sales is not a good leader or does not have a positive impact on the sales team, it can lead to low morale and poor performance among team members. This can create a toxic work environment and lead to a high turnover rate, which can be costly for the organization.

4. Damage to the company's reputation: If a VP of sales is not able to effectively represent the organization to clients and partners, it can lead to a negative perception of the company and damage its reputation.

5. Turnover costs: If the VP of sales is terminated or leaves the organization due to their poor performance, it can be costly to replace them. The organization may need to invest in recruitment and training for a new VP of sales, which can be time-consuming and expensive.

6. Loss of customers: If the VP of sales is not able to effectively lead and manage the sales team, it can lead to a loss of customers. This can have a significant financial impact on the organization, as acquiring new customers is often more expensive than retaining existing ones.

Wrap up

Overall, hiring the wrong VP of sales can be a costly mistake for a SaaS startup. It's important for the company to thoroughly vet candidates and ensure that they are a good fit for the role and the company culture. This is where a Fractional VP Sales can come in handy. Having an expert guide you step by step through recruiting for this business defining role, can help make sure you don't become one of the 70% who get it wrong.

Check out our next blog post on how you can reduce your chances of mis-hiring your VP Sales via our recruitment checklist.