B2B sales · Business Development

How to measure cofounders and remove if necessary

Steve Procter ... Venture Technologist Tech Entrepreneur seeks sales & referral partners for www.nearevo.com

April 24th, 2019

I am looking to bring in 1 or more cofounders who can help with sales and marketing and would like some advice on how to measure their ongoing achievements and how to remove them if they aren't measuring up.


So lets say, as a tech entreprenuer I've built a new b2b business, it has a few tiny sales and I have the operations, back office and a tech roadmap all under control. But I now want to bring in a few sales/marketing cofounders. Imagine I'd be willing to give up to 50% of the business in return for people who can, in the next 12 months achieve actual sales of £500k (a few other goals, but lets simplify it for the purpose of this discussion). So the shares would be an option based on achieving this goal. (obviously I need to sell the vision and convince them of what is possible. But assume this is all done)


If I bring on cofounder sales-people then measurement is easy. So perhaps the simple answer is to initially only look for sales cofounders who can get their hands dirty with actual measurable sales work.


But we all know that marketing (with the multiple strands that this entails) is just as important. So I'd really want to look for 2 or 3 people who between them can begin to drive the business and live and breath it's vision.


Some might say that as long as they all put in 12 hour days and appear to live and breath the business then that is enough. This is certainly important, but I strongly believe that bringing real sales (and cash) through the door is equal.


So are there others out there, who have brough on sales and marketing cofounders and got a workable plan on how to measure what they achieve? And also put practical agreements in place on how to say "sorry mate, it isn't working, your options are void, goodbye"?


Steve

Paul Garcia marketing exec & business coach

April 24th, 2019

I think the mistake is in looking for cofounders, not in measuring your team. The first to do something doesn't make them a founder. Founders have decision-making authority in the business, share the vision for the company, feel like they are the company, not just working for the company.


Of course you should measure your team, but compensating them is a completely separate issue. Most people don't want a stake in the company, they want a career that meets their personal goals and recognizes their motivations. This is even more true for marketing and sales people. If you want to tie their compensation to company perfomance, great. But if you want to give them shares in the company to reduce their salary burden, you're severely limiting the pool of candidates who could really have a positive effect on your business.


Yes, this is CoFoundersLab. No, most people don't actually need a co-founder. If your business is already operating, even slowly, you're really not in the founding stage anymore. You're in an operationally awkward stage that most businesses face when the owner is no longer the primary salesperson, when you need to develop strong processes, and you need to transfer knowledge through some kind of training to spread out responsibility more laterally in the company. That does not define finding more co-founders. That's just normal growth.


Don't hamstring your business by limiting the pool of candidates to those who are willing to trade equity for work. There are far too few of them. And mostly sales and marketing people aren't willing to work in that kind of arrangement anyway, making the pool of those even smaller than for other roles.


I would assert that marketing is 90% of the issue, not sales. I hear it over and over again from nacent businesses, "All I need is more sales." This is rarely if ever a sales problem. Rather, it's a symptom of bad product-market fit, something that would have been addressed with a strong marketing strategy before the product was ever developed. Fixable, yes, but with far more effort than if it had been done before the product was launched.


Bringing in high-performing salespeople cold isn't even possible until you have worked out, tested, and refined your sales process to a point where a trained monkey could do it. Giving the sales function to an outside firm is even harder, because they always do less well than your trained internal sales team that has more of a stake in outcomes.


The second think I recommend adjusting in your expectation about co-founders is having more than one. By the nature of the decision process, the more people you have with authority, the slower the company moves, the harder decisions become, and the more likely you are to have failure points in the dynamic of leadership. Future employees won't know where to turn. And the chance of disagreement can again hamstring the business. The best co-founder scenario is two people. Each person you add beyond that doubles the potential conflict, harming more than helping your business.


If you want 2-3 people to help drive your business, get your processes fixed first so there's a clear framework for anyone to measure "Is this thing I'm about to do going to move us closer to the ideal we've established?"


It's highly unlikely you will find many if any people who have marketing/sales co-founders. It's not a typical assignment of responsibility. All owners are salespeople whether that's their official role or not. And no one can succeed highly in sales if there was no marketing strategy that came before deciding what to sell, and even if they're lucky that the product is a natural fit, without a process, it's almost random what results you're going to get.


There are a lot of theories about marketing metrics. Reasons exist to believe any of the models. What works for you depends a lot on your personality, the culture (how people interact and how they solve problems), and the way in which your ideal customers make buying decisions. It's not all quantitative, meaning number of leads, number of clicks, number of deals won. There is just as much value to marketing that drives your position as expert in your industry, in developing share of voice, in being able to retain customers you already have.


Your options regarding existing co-founders pretty much rely on what you agreed to at the beginning. It's often close to impossible to change the arrangement after-the-fact, unless the other partner agrees that they want to surrender their position for their own reasons. As far as setting up workable agreements before you adopt a co-founder, there are a number of models. My preferred arrangement is earned equity. That's defining the amount that vests after reaching certain performance standards that are directly attributable to their contributions. That's both incentive to do well, and defines a clear path to where you agree things should be going. You have to be a little cautious that some things don't get sacrificed just to reach a goal, but hopefully you've chosen someone with whom you have shared ideals.


You actually don't want to look for co-founders that overgive (and then become resentful). An ideal partner knows how to set realistic expectations, will jump in when there is an unexpected pressure that needs attention, but generally understands that work needs to be planned well enough that there's a balance between work and everything else in life. Living and breathing the business in terms of enthusiasm maybe, but killing themselves to get through the workload is really just evidence that there is insufficient planning or resources.


Real sales and cash through the door is going to happen if you did the pre-work of marketing strategy before product development, and continue to refine your processes and testing assumptions all the time so you improve, improve, improve. It does not come from mystically endowed salespeople who pull rabbits out of hats or summon monkeys to fly out of their butts.


There are two philosophies to sales and marketing. The first is that marketing is the servant of sales. The second is that marketing owns sales as the part of communications that interfaces with customers directly. Obviously I subscribe to the second philosophy. And a lot of people tell me I'm a salesperson, even though I don't call customers to make sales. I do however approach the enterprise as something that helps meet a specific need, and in that have conversations to discover what people need and direct them with information to solutions that fit their needs, whether I have the solution or someone else does. My strategy is to be free with information, be accurate, to listen, and to help people get what they need, even if it's not from me. I aim to be expert in what we do, and to educate prospective customers so they know how to match themselves with solutions, mine or others. I know clearly what my ideal customers look like, and what the ideal experience for them looks like. Customers are both external, and internal (employees).


Good luck! I think you can find the marketing and later the sales resources you need, but I don't think you need more co-founders.


Greg Ioffe co-founder and CEO, Vixtera. Inc

April 24th, 2019

Steve, your thinking is on the right path. Can speak from my own experience. I've joined Vixtera, my 3rd startup, this way. The role has quickly become inseparable from so many other functions and duties, so, naturally, I moved from... let's bring some sales, to positioning, overall strategy, new product, channel strategy, bus model, go to matket, etc. As the result, my responsibilities have quickly evolved from that to COO and eventually co-founder and CEO. My scaled (increased) equity has reflected those changes as well. I eventually divested some part of business, consolidated activities and facilitated sustainable growth. As the result, we, two co-founders, have full control of the company and are profitable. Contact me privately if you have any question. Cheers, Greg

Eder Holguin CEO OneQube I Serial Entrepreneur I Digital Sales and Marketing Expert

April 24th, 2019

Steve,


Why are you thinking of bringing co-founders? What else are they bringing to the table other than sales? Are they bringing capital? Sounds like you need to hire a couple of salespeople that will get compensated via commission + stock options based on performance instead of co-founders.


If you are set on bringing co-founders, you can set up agreements that including a percentage of shares based on specific goals (sales, new clients, revenue, etc...) and a vesting schedule where those shares only start vesting after hitting those goals, if they don't perform as per what you agree on in advance, those shares go back to the company.


I speak from experience when I say, you don't want to bring co-founders to your business unless they really complement you and the business and bring a lot more to the table that just revenue.


Good luck.


Eder Holguin

CEO

oneQube.com

http://www.EderHolguin.com

Michael Barnathan Adaptable, efficient, and motivated

Last updated on April 25th, 2019

A cofounder relationship is like getting married. If you're thinking of getting divorced before you even get married, you are obviously getting into a bad situation. Adding a cofounder is not a light or easily reversible decision. Cofounder splits are such weighty events that businesses often don't survive them.


Cofounders are co-equal members of the company's governance, not just employees you reward with equity. You should have an extremely high level of confidence in the skill of anyone you bring onto your founding team, because they are the highest ranking domain experts in their areas and they will be responsible for crafting their own strategies and success metrics to tie into the business' overall goals. You should therefore be adding this person because you need their strategic and domain expertise to build and scale the business. If you already know everything about their area, you do not need to add them to the founding team.


For example, I'm an engineer and often get recruited as the CTO in software startups. The nontechnical founders in the startup do not get to evaluate the technical ability of people I recruit, the composition of skills I choose for my engineering team, or the stack I select for the software's architecture. Frankly, they don't know enough to do this well. That is my job, built on top of a background the others don't have. A nontechnical founder getting that involved with an area in my expertise and outside of theirs is a major warning sign, and indicates that they (a) are making major business decisions from points of weakness rather than strength and (b) see me as a subordinate who is not allowed to push back on their decisions rather than an equal of theirs in the governance and success of the company.


Now, if you want to hire someone *under you* as an *employee*, that brings up a different question: do you have the knowledge and skills to manage this person? Because in this situation you are their manager. Performance management is the task of the manager, but I don't know anyone in management who has ever started from that point. Rather, set OKRs for business success, break them down into an executable roadmap, and evaluate your reports on how well they execute the components of that roadmap.


Finally, it strikes me that you're putting yourself in potential legal jeopardy by posting this. If you fire your "cofounder" right before their options vest, they can point to this post, particularly the "your options are void" bit, as evidence you were trying to obtain their work without compensating them from the very beginning.

Dane Madsen Organizational and Operational Strategy Consultant

April 24th, 2019

As usual, @PaulGarcia is spot on.


This point is critical "... I would assert that marketing is 90% of the issue, not sales. I hear it over and over again from nacent businesses, "All I need is more sales." This is rarely if ever a sales problem. Rather, it's a symptom of bad product-market fit, ...".


Having done it backwards in the past, then seen this error multiplied in companies I have been with or advise, I am never surprised to see it anymore. His support of that point, how to work around it, why founder sales is crucial to the product/market fit, and the waste of capital, equity, and overt frustration for hiring a sales team before there was the product/market fit and a sales process you are more intimate with than your morning routine, is fundamental.


So, I obviously agree: you do not need co-founders as much as well thought through processes. Once you have this in hand, finding the right talent as force-multipliers will be significantly easier.

Bill Flynn Catalyst Growth Advisors - We help startups and scaleups with People, Strategy. Execution and People

April 25th, 2019

Steve - First, a few questions.

1. Have you achieved Product/Market Fit? If so, how do you know?

2. If not, do not hire anyone in Sales and re-focus on solving a problem worth solving and a workable/scalable business model.

3. If you have achieved Product/Market fit, then you have some repeatability in the business. That means that as you look at your client base, the majority have bought the same solution.

4. If so, build a Sales Playbook. I like the one from Jack Daly but there are lots of options.

5. Once you have a version that is battle-tested, you can think about hiring a Sales VP or Marketing VP. They should come in and make things much better but don't count on them to do as good a job as you right now since you are probably responsible for most of the current customers.


Good luck!