HubSpot’s Best Practices for Managing SaaS Inside Sales

Mark Roberge photoBest practices for inside sales managers. An interview with Mark Roberge, VP of Sales at HubSpot, discussing how he blends science and process with the art of selling.

HubSpot is a SaaS company selling Inbound Marketing software. HubSpot has grown revenue over 6,000% in the last four years, placing them #33 on the Inc 500 fastest growing companies list. They now employ about 300 people. I have always been very impressed with how Mark has run their inside sales organization, which has now grown to 110 people. In this interview, I talk to Mark about his strategy and tactics for running a successful SaaS sales organization. I believe Mark is at the forefront of using data and science to drive how he hires and manages his organization, and this article should bring out some interesting best practices.

Mark’s background is unusual for a VP of Sales. He trained as an engineer, and started life as a programmer at Accenture, and tried his own startup company before going to MIT’s Sloan School of Business, where he met Brian Halligan and Dharmesh Shah the founders of HubSpot. His engineering roots made him very process and metrics driven, which accounts for a lot of the ideas he has employed in managing the insides sales group at HubSpot.

How did MIT Sloan School influence the way you think about managing?

It taught me to seek out science and data whenever possible to understand the business and make decisions. It also helped teach me how to be an entrepreneurial leader. The key lessons there were to think big, make bold decisions, and constantly challenge the norm.

What are your goals as a sales exec, and what is your strategy for achieving them?

Goals are Predictable, Scalable Revenue Growth

My Strategy is best summed up as:

  • Hire the same type of successful sales person
  • Train each sales person in the same way
  • Provide each sales person with the same quantity and quality of leads
  • Ensure sales people work the leads using the same process

Hiring

Starting with hiring: Tell us a bit about what attributes it takes to sell HubSpot?

HubSpot’s sales context is evangelistic. In the early days, few people had heard of HubSpot and Inbound Marketing. Over the years, market knowledge of both HubSpot and Inbound Marketing has dramatically improved. However, even folks that have heard of Inbound Marketing do not understand how to develop such a channel. In HubSpot sales, we need to educate people over the phone and literally convince them to turn their sales and marketing process on its head. To do so, our sales team needs to earn the prospect’s trust, gain a deep understanding of the prospect’s business goals, understand their sophistication with sales and marketing, and articulate an adoption plan of inbound marketing that aligns with the prospect’s context.

Our product is very broad in its capability. This breadth of functionality is good in one regard, as we can service a wide variety of prospects with a wide variety of business goals. However, this breadth of offering also adds complexity to the sale. A demo of the entire product would take hours and would overwhelm the prospect. Sales reps need to be sophisticated enough to tailor the demo to the prospect’s context.

How do you go about hiring the right kind of sales person?

We started off by writing down a set of attributes that we thought would be important, and used these during interviews to evaluate candidates. Then over time as we collected more data, we were able to go back and measure which of these attributes actually best correlated with success. If you look in the graphic below, you will see us looking at three criteria for the success of a rep:

  • Average quota attainment %
  • PPR – Productivity Per Rep
  • LTV – Life Time Value of the customers that they signed up

The last metric we use to evaluate success, LTV, is interesting as it highlights a unique aspect of SaaS sales: sales reps can close deals by selling to the wrong customers or by using sales pressure tactics. However those deals will usually churn fast. So an important metric for success is whether the customers have a long life time.  LTV also takes into consideration the size of the monthly payment, which can indicated how well a rep prioritizes larger deals, and manages their overall funnel to get the best revenue out of a given set of small and large opportunities.

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Once we had identified the attributes that mattered most, we set out to build a process around the way we did hiring to ensure we identified these. The process involves each interviewer using the form below to score each candidate:

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When I show these slides on the road, the audience obsessively starts writing down the criteria. I would not advise that you do this. The important take away here is the process to get at the answer, not the answer shown above. Every sales context is different. Every buyer persona is different. As a result, the ideal sales person for your company’s context will likely be different than our profile at HubSpot.

Is there anything else interesting in the way you go about interviewing?

Here are three additional tips:

  1. Have the candidate conduct a number of role plays throughout your interview process. Make the role plays about your company and challenge the candidate to do lots of homework before these exercises.
  2. Coach the candidate throughout these processes. How the candidate responds to this coaching and adapts is very important to their potential in my opinion.
  3. If the candidate is interviewing for a phone sales role, be sure at least one of the role plays is done on the phone.

Onboarding

How do you go about On-boarding a new Sales rep?

What I saw going on at other companies is to take a rep and pair them up with a senior sales rep that they shadow for a month. I don’t believe that works, as what I have observed is that our most successful reps succeed in different ways. One might be extremely strong technically, and win over customers because of their ability to use that knowledge to help the customer. Another might have great charm and charisma, and use that to win over the customer. By having a new rep that has one style follow another senior rep that uses a different style, they will not have a successful learning experience.

The HubSpot approach is the following:

  • Define the sales playbook (unique value proposition, target customer, competition, common objections, product information, etc.)
  • Give sales people hands-on experience with your target persona’s job and all the pain that comes with it.
  • Use exams and certification programs to ensure that you have a consistent product coming out of training.

The hands-on training is really important. We want to train our sales people to become consultants or experts that can understand a customer’s business, and use that understanding to become a trusted advisor to the customer. We think that the best way to do this is to have the rep experience the pain a customer feels, and then to use HubSpot to address that pain. So we make them create their own blog, and drive traffic to their blog.  This experience is invaluable. They get to understand what it feels like to have to drive traffic to their site, and how they can use HubSpot’s product to help them. It has the benefit of being a real life situation.  We think this is really important for their transition to becoming consultants.

What is the approach that you teach for approaching a new lead?

We want them to do extensive research on the customer before making the first call is placed. The rise of social media has made this stage so important. What is the prospect’s professional background? Does the prospect appear to be a decision maker? Who does the prospect report to? Who does the prospect know that I may know? What activities has the prospect been involved with lately? What are the prospect’s professional interests? The answers to these questions can be found before picking up the phone. This is great information to guide the strategy to the initial connect call.

How do you “Ensure sales people work the leads using the same process?”

(Note: HubSpot may be unusual compared to other companies in that their Inbound Marketing techniques generate enough lead flow, that they don’t need to use cold calling.)

I start by defining the process (see below) to make sure that everyone has a common terminology.

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Then we use metrics to drive the behaviors that we are looking for. The chart below shows how we measure sales reps through the different stages in the process. (Note that the data has been modified and is not actual HubSpot data.)

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In the illustration above, the charts on the left measure the number of activities at each stage; the charts on the right measure the conversion rates from one stage to another; and the graphs at the bottom show the overall conversion rate from two higher level stages to closed deals.

Take a look at the sample data above. If you look closely at the orange rep, you will see that they do a great job of taking a worked lead and turning it into a demo (second chart down on the right hand side). However they do a poor job of converting their demos into closed deals (third chart down on the right hand side).   This tells us that this rep does a good job on the phone, but is doing a poor job in their demos. Now look at the green rep. Here you see the opposite: great at converting demos into closed deals.

Peel back the onion on weak areas

When we see a weakness in an area, our first step is to see if we can “peel back the onion” on that metric to get a more detailed view on the specific area that is weak. For example, if a rep has a weak Worked Lead to Demo conversion rate, we can dig deeper (top right chart) to verify whether the rep is struggling to connect with the prospect, or if the rep is getting them on the phone but struggling to get the demo. My coaching strategy is very different depending on the finding.

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On-going Coaching and Remedial training

This data can now be used to target the skill set that, if improved, will make the most significant difference in a rep’s success. I am a big believer that it is best to only work on one skill at a time. Determining which skill will move the needle the most is a key ability of great sales managers. A data approach to this diagnosis is very helpful.

Use Science, not Gut, to find the optimal attempts per lead

I believe in sales that both art and science are necessary for success. However, I believe science is under-utilized. There are a number of questions that are often left up to the art of the sales person that we have successfully answered in our funnel with science. How often should you call a lead? When should you give up? What should you say/send on the 1st attempt, the 2nd attempt, etc.? Does this information differ based on the lead attributes? These are all questions that can be answered with science.

The chart below is an example. Here we have used a scientific approach to figure out the optimum number of attempts that a rep should use for trying to contact our small business segment leads.

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Note: that the data in the chart above has been modified, and is not the actual HubSpot data.

Hold Sales Reps Accountable to the Behavior You Want

Once the answers to the above questions are found, build them into your process. Train the reps that following these actions is statistically the best way to make the most money. And automate ways to hold the team accountable to these behaviors. For example, daily dashboards like the charts below can be produced to illustrate where reps are against these best practice behaviors. These charts should be mailed daily to the entire team. Managers need to be trained to read these charts and hold reps accountable to the desired behaviors.

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How do you work with Marketing to ensure a consistently high quality of leads?

This is often one of the most problematic areas. In HubSpot’s case it works really smoothly. We have great communication between sales and marketing about what is needed to reach the number.  The way this works is that there is effectively a “contract” between sales and marketing. That “contract” defines the following things:

For Marketing:

  • What qualities are needed in a lead before it is ready to hand over from marketing to sales
  • How many qualified leads are needed each month

For Sales:

  • How long they are allowed to take before attempting to contact a lead
  • How many attempts they will make to contact that lead

Use Science, not Gut, to determine which leads are Sales-Ready

Let’s take a deeper look at the marketing side of this equation. The charts below demonstrate correlations between prospect behavior within our marketing program and success in the sales process. Do leads that originate from search engines or email campaigns tend to perform better? Are there specific search terms that make a lead very qualified? When a lead visits the site for the first time, what behavior causes the lead to accelerate through our sales funnel? What is the most influential piece of content on our website that causes leads to close fast and at a high rate?

Once we have the answers to these questions, we can assign an accurate score to each lead. Too many companies build their lead score on the opinions of the sales people or the marketing team. A gut-driven approach is a substantial missed opportunity. The data is available to provide this guidance and is so critical to the efficiency of your funnel.

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Hold Marketing Accountable for Lead Quantity and Quality

With a statistically driven lead grade in place, we can now aggregate the results into a target points score for marketing to hit. It is important that the target is not the number of leads but instead a number of points that corresponds to high quality leads. A demo request may be worth 10 points. A white paper download may be worth 1 point. This approach ensures the alignment between marketing and sales to ensure marketing is focused on the leads that perform best in the funnel. Once the point target is established, hold marketing accountable to the target on a daily basis.

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How have you adapted the organization as it grew through certain key sizes?

I have listed below a series of changes that happened as our growth continued:

  • One of the first changes that happened was the need to add in a layer of sales management between myself and the reps. We have found that each manager can handle approx. 8 to 10 reps.
  • Next we split the sales organization to specialize and focus on different types of customers. We had initially two customer types, and later three. It helped to have reps that worked only on the one type of customer as they became more expert at understanding the needs of those customers.
  • Next we recognized the need for manager development, and we created programs to address things like leadership training, rep mentoring, etc.
  • After that, some of our manages became Directors, and we had to evolve development programs for them
  • One aspect that I have enjoyed about rapid scale is the need to constantly re-define my role. When taking a team from 1 to 100 and growing revenues by over 6000%, if you are not re-defining your role as an executive every 6 months, you are probably not planning for the next phase fast enough.

HubSpot sales environment

Conclusion

I’d like to thank Mark for taking the time to share his thoughts. What is most striking about Mark’s approach is how he blends science and process with the art of selling.

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  • http://www.salesprocessengineering.net Justin Roff-Marsh

    The comments on training are very interesting.

    I’m surprised that Mark didn’t discus the importance of choking the release of leads to salespeople. If they are not measuring the corellation between leads-under-management and outcomes, they should run some experiments.

    Sales environments are no different from production environments in that WIP will tend towards infinity unless checked. And inflating WIP means inflating lead-times, which tends to impact directly on outcomes.

  • http://blog.hubspot.com Mark

    Thanks for the comment Justin.  If I understand your point correctly, it is a good one.  The way we address this issue is we build in lead expiration rules that fire if certain stages are not reached in certain time-frames.  For example, if a lead is not worked within 24 hours, if a qualifying call is not completed scheduled two weeks, etc., the lead will be re-assigned or placed into a nurturing queue. As a result, sales people have more flexibility to throttle up the amount of work they take on but will quickly lose those opportunities if they do not keep up with the expected actions.

  • http://www.salesprocessengineering.net Justin Roff-Marsh

    Yeah, Mark. There are two ways of tackling the problem. You can close opportunities faster or you can open them slower.  My preference is to simultaneously choke the release of opportunities to salespeople and maintain (healthy) pressure on salespeople to keep their utilization and throughput-per-call within the optimal range (by monitoring these metrics in daily huddles).

    This puts them in a position where they have to close-out existing opportunities in order to get their hands on new ones. It creates an environment where the the ideal behavior is the emergent behavior.

    All your metrics in the post above are monitoring flow — which is great. But the other dimension is to monitor queue size and contents — just like you would in a manufacturing operation. If you or I took a walk through a manufacturing plant (I note you’re an engineer) we’d probably discover more about the operation of the plant by looking at the WIP than we could by examining their flow metrics. Sales is no different — it’s a finite-capacity environment.

    David has a copy of the first few chapters of an (upcoming) book of mine that explore this. If you ping him, I’m sure he’ll send you the PDF!

  • http://blog.hubspot.com Mark

    That would be great Justin.  I like your point.

  • http://www.pixability.com Bettina Hein

    Mark, this is extremely helpful content. We’re going through a similar sales learning curve at Pixability right now – we’re just down the street from you :-). I’ve started reading Justin’s first chapters (hi Justin – we just met at the Fortune Growth Summit) and I find his thinking interesting. Equating sales with a manufacturing plant is a fresh metaphor but it definitely holds some truth. 

  • http://www.forentrepreneurs.com David Skok

    I will send Mark the PDF file.

  • Kevin

    Great stuff here, thanks for sharing!  Any way we can see this PDF David, as these points are right on.  Cant wait for the book!

  • Brian Geery

    Thanks Mark and David, good read!
    Mark, can you share your thoughts on sales reps variable compensation? How do they earn it and when do they receive it?

  • http://blog.hubspot.com Mark Roberge

    Thanks for chiming in Brian.  Tough question that would require its own blog article (if not many).  A few quick thoughts:
    1) Variable compensation is an amazingly powerful lever in the executive’s tool kit.  Define your company strategy, think through the behaviors you want your sales people to follow to support the strategy, and define the variable plan around the behaviors.
    2) Keep it simple.  Keep it fair.
    3) The plan is dynamic.  Your company strategy changes and so does the compensation plan (usually once per year).
    4) Pay it out as close to the good (or bad) behavior as possible.  Many SaaS companies are moving to monthly, rather than quarterly.

  • Davidr

    Thanks Mark and David, Excellent post.Do you have any experience with an outsourced leadgen team? Obviously you have less control on hiring and internal process but you can invest in training, alignment, and measure their deliverables.

  • http://twitter.com/joesharron Joe Sharron

    Likely the best use of data to produce predictable, scalable revenue growth.  Fantastic job, Mark.

  • http://blog.hubspot.com Mark

    Thanks David.  I do not have a lot of experience with outsourced lead gen.  Based on conversations with colleagues, my opinion would be that outsourcing does not work often.  Its potential to succeed depends on your sales context (buyer persona, industry, transactional vs. consultative, etc.).  If you think it may work, run a test.  Find a way to measure success potential in a short period of time with minimal investment.  If it works, scale it up. 

  • James Sainty

    Really interesting read and impressively ‘human’ metrics. I’m really just musing here but provided there are a several senior guys with a variety of approaches to chose from, couldn’t junior reps be matched with senior reps based on their character traits? This way one can attain a healthy combination of quantifiable progress (through exams/’training’ etc that emerges from Mark’s structured development plan) AND additional human experience that one can only glean from people that have seen and done it all before…
    Not a criticism by any means. 6000% revenue increases in 4 years – something must be working!

  • http://twitter.com/ori216 Ori Yankelev

    Thanks for sharing all of this detailed info. Really interesting

  • http://www.facebook.com/hannes.skirgard Hannes Skirgård

    Hi, great post. One thing. What tools do the sales rep have to help them follow the process? A computer system developed by you, third party CRM, paper or just education and information stored in their head? 

  • http://www.forentrepreneurs.com David Skok

    In all cases the companies that I work with use Salesforce.com. They don’t necessarily love it, but it’s the best tool around right now, and has the best compatibility with all the third party applications out there.

  • http://www.facebook.com/hannes.skirgard Hannes Skirgård

    SalesForce is great at keeping track of what had happend with the leads but I see no feature to monitor activities in Salesforce or helping me keep track fo to do next or how to follow best practice. Well there is the task list but that as as primitiv as a peace of paper. 

  • http://www.forentrepreneurs.com David Skok

    Sorry – I think I misunderstood your original question. I agree that this is a different need. Unfortunately I am not aware of any software that tackles that problem. Perhaps other readers might know of solutions. If so please can you help Hannes.

  • http://www.salesprocessengineering.net Justin Roff-Marsh

    Hannes

    We work with a range of CRM’s, across multiple clients.  All (including SF) have the capabilities you claim SF lacks.

    The trick is to use the opportunity module to aggregate ALL activities performed by salespeople.

    This means creating opportunities before routing leads to salespeople — rather than making it optional for them to create them (or not).  Salespeople can then associate all activities (phone calls, emails, etc) with the appropriate activity.

    You now have data relating to the volume of effort expended (number of activities), and results produced (both the velocity and the outcome of opportunities).

    Furthermore all campaigns can now be associated with opportunities, meaning that you can see the entire life-cycle, from the origination of an opportunity to its outcome.

    As I said, almost every CRM has this capability.  The trick with customization is to start by designing the reports you want to review in sales meetings, and then reason backwards from there.

    Justin

  • Kevin

    Salesforce is just a fancy calendar tool, try Landslide.com to see inside your funnel.  Works great for us

  • Anon

    When you say “literally convince them to turn their sales and marketing process on its head”, you don’t mean ‘literally’. 

  • Yusuf Hasanogullari

    Great points and very impressive! As a Hubspot customer, I find it very interesting to see how you implement an efficient sales organization using data as the guiding light.

  • Dom

    David,

    I’m from Italy and I just set up a SaaS company a year ago. I want to ask you a question about our organization chart. We have five different departments as Software Development, Partner Success Team, Sales, Operation and Product Development. These all five connected the one -CEO-. and organization chart is horizontal. Have any suggestions to improve this chart? How can I change it to make effective?

  • http://www.forentrepreneurs.com David Skok

    The common departments that I see in an early stage SaaS startup are Software development, Sales, Marketing, Customer Success (support), Operations, Finance (frequently a part-time interim CFO). Occasionally we also see Business Development if there is an opportunity to grow revenue through strategic partners. I hope this helps.

  • Dom

    Dear David,

    Thank you for your concern. I’d like to talk about inter-dependency? Do you think any of them should be connected to each other? For example: Should Customer Success Director report to Sales Director? or should Product Director be under Software Development Director?

  • http://www.forentrepreneurs.com David Skok

    There is no hard and fast rule here. I think it depends very much on the talents and seniority of the people you have in your team. Customer Success can absolutely report to Sales, if your head of sales has the vision and management skills to handle both functions. With Product Management, it can report to Software Development, but again only if your Head of Software Development has the vision and skills to manage this extremely important function. I hope this helps.

  • Dom

    Thank you so much. I just had one confusion left. What do you think about responsilibities of Product Manager?

  • http://www.forentrepreneurs.com David Skok

    The role of the Product Manager is to define the product strategy and requirements. They usually do this by gathering input from customers and prospects in the target market, and then writing an MRD (market requirements document) and a PRD (product requirements document). They would also evaluate competitors as part of that process.

    They then work with engineering to help engineering understand those requirements, and to help prioritize which features to build first. In my view the best product managers will bring developers into customer meetings and involve them in defining the product, as engineers are often very creative and able to come up with excellent innovations once they understand what the customer is trying to accomplish.

    This role can be thought of as Inbound, in that it gathers information from the outside world and brings it back in to the company. Contrast that with the role of Product Marketing, which is to develop the messaging used to describe and market the product to the outside world. They also typically lead the evangelism of that message to the market, talking at customer events and conferences, speaking to analysts, etc. They are also responsible for developing the marketing and training materials (including things like competitive analyses). They typically train the sales force and resellers on how to sell and position the product.

    It is fairly common for a single person to do both Product Management and Product Marketing. But if you are going to do that, recognize that these are different jobs and require some different skills.

  • Dom

    Thank you David I really appreciate your help. I have final question. We have opportunities for upselling for our current customers. Regarding upselling shall Sales Team communicate with the customer or Customer Success Team? The point that we are not very sure is CST has already build a relationship with the customer and customer sees CST as her first contact. However upsell is a selling, so should upsell be done by Sales Team or CST. What is the optimal senario?

  • http://www.forentrepreneurs.com David Skok

    That’s a great question. I believe it depends on how difficult the selling work is, and how good you think your customer success team is at selling. Because of the relationship you point out, I would favor using the CST to do that selling, and train them to be good at it. If it is renewals, it should be simple. If it is upselling to a different version, that should also be straightforward. Where things may get harder is if they need to do cross selling of a very different product; or move from one department to another. Since I don’t know the exact details of your situation, I would recommend using your own judgment here, and don’t be afraid to try different experiments to see what works best.

  • Robert

    Very good article and comments indeed!

    I run a subsidiary of a small Saas company and we are in the process of implementing a small inside sales team to work off the leads generated by our marketing team. We will start to use Salesforce if we can manage to get the configuration right which is actually harder than I expected as the new sales process has not been fully designed yet.

    Anyway, setting a compensation model for the inside sales team has been proven to be more of a challenge and I am now looking for some real life examples. We sell software subscriptions on quarterly or annual contracts and we have six different modules so lots of scope to cross sell.

    I like the idea of running monthly cycles but also incentivise on-selling to existing customers. I also want the customers to re-subscribe and therefore don’t want the sales reps to ‘over sell’ the first subscription. My idea if absic salary is that it should be high enough so the sales reps can carry on ‘living their lives’ even if the inflow of leads is low.

    Apologies for the lengthy message – any help on how to structure a model around the above would be appreciated.

    Cheerio

  • http://www.forentrepreneurs.com David Skok

    I think you are on the right track. There is another blog post with information on Sales Compensation here: http://www.forentrepreneurs.com/metrics-and-compensation-for-saas-inside-sales/
    If that doesn’t help you, try contacting the Bridge Group for more real world examples. Best, David