Prompt Decision Making – Risk-Reward Analysis

**RISK-REWARD ANALYSIS: Hiring a VP of Sales at $180k/year** --- **1. POTENTIAL RISKS** 🔴 **Risk A: Wrong hire / bad cultural fit** (Severity: 9/10) - Cost: $180k salary + $50k recruiting + 6 months lost opportunity = $280k+ sunk cost - Probability: 35% (industry average for VP-level roles) - Impact: Team demoralization, deals stall, need to restart search 🟠 **Risk B: Cannibalize founder-led sales motion** (Severity: 6/10) - Current founder closes $40k/month via personal network. VP might alienate these relationships. - Probability: 25% - Impact: Short-term revenue dip while VP ramps 🟡 **Risk C: Cash runway pressure** (Severity: 7/10) - $180k = 15% of current $1.2M ARR. If growth doesn't accelerate, runway drops from 18 to 14 months. - Probability: 40% (if VP needs 6+ months to show results) - Impact: Forces next fundraise earlier than planned --- **2. POTENTIAL REWARDS** 🟢 **Reward A: Revenue acceleration** (Impact: 10/10) - Target: VP builds outbound motion, grows ARR from $1.2M to $2.5M in 12 months (2x growth) - Probability: 45% (if right hire with proven playbook) - Impact: De-risks next fundraise, extends runway, validates product-market fit 🟢 **Reward B: Founder time freed for product/strategy** (Impact: 8/10) - CEO currently spends 60% of time on sales. VP takes this over = 24 hours/week back for product roadmap, fundraising prep, strategic hires. - Probability: 70% (assuming clear handoff) - Impact: Faster product iteration, better investor relationships, improved retention 🟢 **Reward C: Scalable sales process** (Impact: 9/10) - VP implements CRM, playbooks, training that allows hiring SDRs/AEs later. Foundation for $10M+ ARR. - Probability: 60% - Impact: Transforms from founder-dependent sales to repeatable machine --- **3. TIMEFRAME ANALYSIS** **Short-term (0-6 months):** - Risk-heavy period: Onboarding, potential revenue dip, cash burn - Key milestone: VP closes first deal by Month 3 (validation) **Medium-term (6-18 months):** - Reward inflection: If hire is good, revenue should double by Month 12 - Break-even point: VP needs to generate $360k new ARR in Year 1 to justify cost (2x their salary) **Long-term (18+ months):** - Compound reward: Scalable sales org enables Series A fundraise, multi-million ARR - Or compound risk: Wrong hire delays growth 12-18 months, competitors gain ground --- **4. MITIGATION STRATEGIES (Top 3 Risks)** **For Risk A (Wrong hire):** - Use fractional VP of Sales for 3 months first ($8k/month trial period) before full-time commitment - Require candidate to present 30-60-90 day plan during interview process - Set clear 90-day performance milestones: 5 qualified demos booked, 2 deals closed, CRM fully implemented **For Risk B (Cannibalize founder network):** - Founder keeps "enterprise/strategic" accounts (top 10 prospects from personal network) - VP focuses on outbound to NEW logos outside founder's network - Weekly founder-VP sync on deal strategy to ensure alignment **For Risk C (Cash runway):** - Negotiate VP salary as $140k base + $40k variable tied to ARR growth milestones - Delay hire by 2 months, close $100k in new ARR first to cushion cash position - Set kill switch: If VP doesn't hit $30k new ARR by Month 6, part ways --- **5. OPTIMIZATION STRATEGIES (Top 3 Rewards)** **For Reward A (Revenue acceleration):** - Hire VP with proven track record in YOUR industry + stage (ask for references from their last startup at $1-5M ARR) - Front-load comp to incentivize urgency: Higher commissions in first 6 months - Give VP direct access to investors/advisors who can open doors to enterprise deals **For Reward B (Founder time freed):** - Document founder's current sales process in Notion before VP starts (playbooks, email templates, objection handling) - Block 2 hours/week for founder-VP "sales training" in Month 1-2 for knowledge transfer - Founder fully exits sales calls by Month 4 (hard deadline to force delegation) **For Reward C (Scalable process):** - Budget $10k for sales tools (CRM, outreach automation, analytics) so VP has resources to build infrastructure - Require VP to create hiring plan for 2 SDRs by Month 6 (even if not executing yet, shows scalability thinking) - Monthly board updates on sales metrics: pipeline, conversion rates, CAC, deal velocity (accountability + visibility) --- **6. RECOMMENDATION** ✅ **PROCEED, but with modifications** (Confidence: 70%) **Rationale:** - Rewards (10/10 revenue, 9/10 scalability) outweigh risks IF you mitigate Risk A (wrong hire) - Current founder-led sales is not scalable past $2M ARR - Timing is right: Product-market fit exists ($1.2M ARR), need to capitalize before competitors **Modifications:** - Start with fractional VP trial (3 months) to de-risk wrong hire - Structure comp as $140k + $40k variable to align incentives - Set aggressive 90-day milestones with clear exit criteria - Reserve $10k budget for sales tools/infrastructure **Decision Point:** If fractional VP hits milestones in 3 months, convert to full-time. If not, you've only spent $24k vs $280k mistake. **Confidence Level: 70%** (Would increase to 85% if you use fractional trial period first)