My personal experience and more recently working with Fresco Capital’s startups has taught me that no matter how different each business and start-up process might be, nearly all new co-founders and CEOs eventually pose the same important, inevitable question: When do I hire a VP of Sales?

My response is always the same: When you really need one.

So, what does that mean?

Co-Founder and CEO Talent and Time Management

Most co-founders and early CEO’s prefer to focus their talent and energy on conceiving and building the new enterprise. The most successful CEOs come from backgrounds in finance and operations. Only 20% of Fortune 500 CEOs started out in Sales or Marketing.

Yet many company leaders also necessarily take on the crucial task of generating those early sales. While a CEO may excel at creating connections and relationships, few are sales experts and are typically overwhelmed with the task’s time commitment. So, during start-up and initial operations, when CEOs think in terms of building the company by building a stellar leadership team, they want to pass on those vital sales responsibilities as quickly as possible to a proven sales expert. After all, a good leader should hire other good leaders, right?

Not yet.

This Is Not The Time to Buy The Rolex

Although a new CEO and leadership team typically want to hire a proven VP of Sales from a very successful company, making a “Rolex” hire early in the company development — and paying Rolex prices for the talent — is not the answer. In fact, poaching an expert VP of Sales by offering a sizeable opportunity and compensation package is counterproductive.

Here’s why.

An extremely successful VP of Sales has become successful because they effectively manage a sales force. A new VP will want to replicate that success by building their new sales team and developing a sales process, complete with expensive sales automation tools. In the long term that is exactly what your company needs. In the short term, however, that is a potentially dangerous waste of resources for your new company during a crucial period. (Yes, I am saying that Google Sheets is a perfectly good CRM at this stage.)

While the VP of sales is putting together a team and developing long-term strategies, nobody is focusing on making actual sales. Lots of money going out, none coming in. The results can be disastrous. The VP of Sales and the team are either fired, quit, or the company runs out of money.

Build Your Sales Team from the Bottom Up

There is a much better option. Build your sales team from the bottom up.

It may feel counter-intuitive, but the bottom up process is more logical and practical for new companies. It makes much more sense to hire a junior salesperson – someone who will one day report to the VP you eventually hire.

The junior salesperson is expected to be out there making contacts and making sales, which is – at this point in time – what the company needs. Look for someone in the industry with knowledge and experience, demonstrated success, and capacity to learn.

I know that the CEO is eager to offload the sales process, but recognize you will need to spend time mentoring your new hire, and plan to give them at only 25% of the labor the first month or two. Don’t expect them to do all your sales work — understand that the CEO may still want — or need – to close these early, important deals and the new hire will only shadow the CEO for the first few weeks, growing into the role.

The point is that a co-Founder or CEO should be doing primarily what the CEO alone can do — especially in sales.

After the salesperson starts to take over more and more responsibility and sales start increasing, hire another junior salesperson and start slowly building your team. Most importantly, keep the team focused on generating sales. At this point, allow the team to start building a sales process and choose some tools that fit your environment.

Now You Need A VP of Sales

So, when do you hire the VP of Sales?

The answer is simple: Hire your VP of Sales when you’re generating enough sales for a VP to manage and your process is starting to strain at scale. That’s when you really need one.

That’s when it makes sense to hire a mega-talented VP of Sales with exactly the qualities and skills you need. That’s when you’re ready to recruit a proven, effective leader, someone qualified to create the big vision, continue building a sales force, make the strategic long-range plan, and facilitate the team’s success.

And that’s when you can afford to invest in the best VP of Sales you can find.

In the meanwhile, the “Bottom Up” strategy is a better short-term approach in terms of all primary company resources – money, staff, time- and it leads directly to stronger company success in the long term.

In the early days of your startup, you might have heard you should have a hacker, a hustler, and a hipster on the founding team. That makes a lot of sense in the initial stages of your company due to the experimental nature of the business. Remember what Steve Blank says: a startup is not a “real” business but rather “an experiment searching for a business model.”

Once you start to move out of the coffee shop and build your initial team, you’ll have to make some careful hiring decisions. I’ve seen founders hiring for new “formal” positions right out of the gate when all they need are operators to validate the business and find product market fit. Instead of finding your next VP of whatever or Chief whatever Officer, you should have no titles until you have paying customers and a product market fit.

I advise all the founding team to call themselves “product” on slide decks and email signature (if you do that sort of thing). Early stage team members should not be going to conferences and don’t need business cards, so the title doesn’t matter.

Here are a few other ways to manage the early stage hiring processes, and run your startup more effectively.

Maintain Equilibrium

Last year, I wrote a piece called “The Holy Trinity of Product Development.” I argued that it’s important to maintain balance in a company. Often, a startup’s first hires (besides the founders), tend to skew either to the technology side (we need 5 developers!), or the marketing side.

Generally, if the founding team is more marketing-minded, they overhire engineers, and vice-versa. Instead, a company should be customer-centric. To achieve this “holy grail,” the company needs both technology and marketing expertise.

Be Well-Rounded

In another article, “Why CTOs Should Know Accounting,” I suggested that CTOs also need to understand the business side of your company. It’s important for all of the high-level employees in a company to be able to converse with the rest of the employees.

Just like the CEO of a company should be able to at least pronounce the word “kanban,” (con-ban not can-ban) and know the difference between Java and JavaScript, a CTO should be relatively familiar with balance sheets, income and cash flow, annual statements, and budgets.

How to Hire

I’d argue that it’s better not to even bother with interviews. Rather, have coffee first. Discuss why they want to work at such an early stage company and review their skills there.

If that goes well, then have the potential employee give a presentation to the entire team. It can be on any topic (Was “The Force Awakens a remake or not?” is a perfect choice), and it gives the team a feel for the candidate’s analytical skills, seriousness about the position, and ability to do something different, while it also provides a unique experience for the candidate.

If the person is successful on their hiring presentation, I’d suggest the “can we have a beer with them” final check. This one’s really complicated – take them out for a beer with the team (or another social engagement if team members don’t drink). Get to know them on a personal level. When companies scale to be over 25 people, it is much harder to do this with the whole company, but each functional area (marketing/sales, tech, backoffice) can do it with their group and a select few members from other functional groups to join.

Avoid Founder Disputes

Early stage companies sometimes have no cash and bring on someone as a “co-founder” with little to no pay. It’s also crucial that you do your best to avoid founder disputes. I wrote a piece on this called “Dynamic Founder Agreements,” but I’ll give you a short summary. I described this agreement like a typical IF/THEN/ELSE.

IF:

The CTO works full-time and performs all of coding and technical duties of V1, his equity is 50% vested over 4 years, 1 year cliff.

ELSEIF:

The CTO works part time, is disengaged, or we need to hire developers sooner than expected, his vested equity is reduced by half and he forfeits his unvested equity. Loses board seat.

ENDIF:

The CTO has to leave the company because he needs a job or a family emergency: if the CTO built V1 then the buyout is a one time payout of $50,000 USD cash or 2% vested equity, if the CTO did not build V1, the buyout is 0.5% vested equity. Loses board seat.

While you might not avoid all disputes, this agreement will go a long way.

Hiring for Bigger Companies

Once your company grows and matures, deliberately hire slow. “Scale” and “move fast” does not mean “hire crazy fast.” Rather, hire for a role only when it is obvious the company is suffering without it.

There is a Silicon Valley secret that dictates that “you make a decision to join a company ONLY if they are resource-constrained. Once they have enough people, time to move on.” The idea behind this secret is that creativity needs constraints. Translation: if your plan calls for ten people, see what you can do with five.

Use these tips when building out your initial team. Don’t fall into the hiring trap.

I recently recommended a friend for a PM job at a hot Silicon Valley startup run by another friend. The startup recently raised a big Series A and was looking to scale. I know the risk of linking up two friends in an employment scenario, however, my friend was more than qualified for this job and my founder friend really needed the position filled.

While my friend was more than qualified, interviewed well, and the team loved him, etc, the founder decided to pass on my friend. The reason: another candidate with the same skills and experience came along that they hired. The difference between the hired candidate and my friend? The candidate that was hired had the same PM experience but all at big companies like Facebook, Amazon, and Google. My friend has spend his entire career at startups.

My question is: was this the right move? If you had the choice between nearly two identical candidates and one had all their experience at big successful companies and one had their experience at successful startups, isn’t it safe to choose the candidate that worked at the bigger companies?

Put yourself in the founder’s shoes. You just raised a big Series A. You are being pressured by your investors to “go big or go home.” You have aspirations to be a big company. This is Silicon Valley, shouldn’t you hire the absolute best talent we can find? Shouldn’t you hire people who worked at Facebook and Amazon since you want your company to be big like them one day?

PMs that only worked at companies such as Facebook and Amazon are super qualified PMs. Huge plus. They also know next to nothing about building a startup. Huge negative. People from larger companies bring the bigger company process, procedure, and culture with them. This leads to premature scaling of your business. The problem is that your startup is not a smaller version of a bigger company. As Steve Blank says, a startup is an experiment looking for a business model, not a smaller version of a larger company. Facebook as over 10,000 employees and billions in profits. My friend’s company has less than 15 employees and no profits. Hire people comfortable working in that environment, who know how to bring a company from 15 people to 150 people. When your startup has 1000 employees and is super profitable you should start to hire PMs from Facebook. In between, you have to hire people who can not only do the job, but also help you grow the business, shape the culture, and constantly evolve the process.

I made this mistake several times at my past startups. At one startup we realized that we needed an HR manager. Since we had plans to “go big” we wanted to hire an HR manager who came from a big company. Big mistake. We were a team of 12 but all of a sudden we were doing 360 reviews and had to fill out a form in order to take a day off. At another startup we wanted to enter the “enterprise” space, so we hired some “enterprise” software people from a large enterprise software company and gave them fancy titles. The problem is that people who work as executives at big companies usually don’t roll up their sleeves and build a product. Nor do they know how to scale a company, they know how to keep a big company big, but don’t know how to build a big company. In addition they wanted to fly business class and have personal assistants, things that did not jive with our startup culture.

Avoid premature scaling at your company and hire not only the candidates with the best skill set, but also with experience in working at and building a startup. Later on when you are bigger and more mature should you hire the people with bigger company experience.