How to stop sales reps from stealing from your startup

by Steli Efti
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Every so often, salespeople do some really shady shit.

It’s not always easy to catch them in the act, but if you value transparency like we do, there’s a good chance you can stop fraudulent sales activity before it’s too late.

We’ll get into the practical steps in a minute, but first I want to share an insane story from Ryan Shank, founder and CEO of PhoneWagon.

Not long ago, Ryan hired a sales rep to schedule demos. The rep’s only job was to cold call prospects and set appointments. He’d get a commision whenever prospects showed up. Pretty simple stuff.

One day, the rep reached out and said, “Hey, I’ve got a demo for you. He called in early.”

Ryan jumped on the call but, after a few minutes, it was clear that the demo wasn’t going anywhere. The prospect didn’t seem to know anything about marketing. He couldn’t even answer simple questions like, “What campaigns are you running?”

After some back-and-forth nonsense, the prospect abruptly hung up.

Nothing about the call made any sense

For one thing, who calls in early for a product demo? 

More importantly: the prospect should've been able to answer Ryan’s simplest questions. He had a legitimate marketing title. But even if the prospect knew nothing— if he’d somehow managed to land a job without knowing a single thing about marketing—how and why did the sales rep qualify him for a demo?

Ryan went into Close.io to figure out what was going on.

The first thing he noticed was that, at some point, the prospect’s email had switched from a work account to a personal account. When he tried pulling up the call activity between the sales rep and the prospect, he couldn’t find one call within Close.io. There were a bunch of call notes, but not a single tracked call. No recordings. Nothing.

Frustrated and confused, he checked out other leads for evidence of recent communication. He started listening to voicemails left by prospects, but something didn’t sound right. Each call—from Dave, Chris, and Anne—sounded a little like the sales rep. They used the same phrases, had the same familiar drawl, and after periods of inactivity, they all wanted to schedule demos immediately.

After listening to a few of these voicemails, Ryan realized that the rep was leaving voicemails for himself.

While using a voice changer.

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He created bogus email addresses to set appointments and called from mass numbers.

But here’s the craziest part:

That first demo call? The one that raised Ryan’s suspicions?

That was the rep, too.

The dude faked a technical demo with his own boss. The founder and CEO of the company. All to get his numbers up.

The whole story is insane. If you want to see it unfold in real time, check out the video Ryan posted a few weeks ago:

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Why do some salespeople cheat the system?

There are plenty of reasons, but it all comes down to greed, desperation, opportunity, and pressure. Salespeople have to perform—there’s no way around it. And when things aren’t going well, some reps just don’t have the strength of character to work their way out of a bad month.

They start looking for shortcuts, like:

  • Fake activity: They report a certain number of calls or emails (or a certain amount of time spent prospecting) without doing any real work.
  • Bad opportunities: They talk to prospects who aren’t really interested in the product, they don’t qualify them correctly, or they make false promises.
  • Stolen leads, opportunities, and deals: They feel like their leads aren’t any good, so they try to steal prospects away from other salespeople.
  • Bad closes: They close deals that shouldn’t be closed. They’ll often say something like, “If you give me your credit card number right now, you’ll have 60 days to cancel before you’re charged.” Sales reps essentially pretend that prospects are fully committed when they’re still on the fence. They might even charge the prospect, which complicates the situation further.
  • Straight up fraud: They fake leads, contracts, and credit cards. You know, real criminal shit.

Here’s why this garbage really hurts: not only are you paying out commission and bringing on bad customers, but you’re also forecasting successes—to your team and your investors—that aren’t actual successes. You’re planning your future around bullshit numbers. You’re projecting growth when, in actuality, these customers are going to churn hard.

So what’s the best way to catch fraudulent activity?

Prevent it from happening in the first place

Be deliberate in your hiring process. Emphasize character, not just sales ability. Do background checks and backdoor background checks. Call people not on their reference lists. See how they worked with others on their team. Call former customers and ask about their experiences with that salesperson.

Ask candidates if they own a voice changer.

In short, take your time. We’re super thorough when we hire salespeople and (knock on wood) I’ve never had someone steal from me in fifteen years.

Encourage transparency

Every sales rep’s activity is an open book. There are no secrets.

Create a system in which you can review calls and emails regularly. You’re all working toward the same goal—to grow your business. No rep should operate on their own little island.

Trust but verify

This is especially true when you bring on a new sales rep. Join prospect calls. Review their emails. When they close a deal, make a quality call to the customer and say, “Thanks again for your business. I know you talked to [new sales hire], so I wanted to learn more about that experience. Have we done everything we can to treat you well and set you up for success?”

If all of the feedback is positive, you can ease off a little. Instead of checking in every week, check in monthly or quarterly. No matter how much you trust a person, always verify that they’re still doing things the right way.

When you catch someone committing fraud, what should you do?

Don’t react immediately. But don’t dwell on the situation either.

Collect as much evidence as you can. Try to determine whether this is a pattern of behavior or an outlier. Check out their call and email activity. Check in with prospects and customers. Take a day or two to really do your homework.

Then, put together an action plan. What if you’re right and something shady is going on? What might happen if you confront them and they admit to fraud? What might happen if they deny any wrongdoing?

Compile a termination checklist, just in case your suspicions are verified. And make sure there’s clear communication (emails, activity data) that proves why you need to take action. If the fraud is crazy enough, you might even want to reach out to your lawyer.

Eventually, you should calmly sit that person down—ideally with a third party in the room to witness and/or moderate—and say, “I noticed some weird stuff going on, so I looked into it further. Here’s the data I’ve gathered so far. Can you explain this to me?”

Don’t make any accusations. Don’t get emotional. Just provide the facts as you see them.

There might actually be a good explanation. We’re all wrong at some point. If that’s the case, apologize to the sales rep, thank them for providing context and clarity, and ask how situations like this can be prevented in the future.

But if the sales rep can’t give you a good explanation—if they don’t remain calm or provide any context that changes the situation—then you need to let them go immediately. No second chances. I don’t care if they’ve worked for you for 3 weeks or 3 years.

Even if you believe people can change, you can’t keep them around for two reasons:

  • This second chance is probably more like a fourth or fifth chance. It’s just the first time they’ve been caught.
  • By letting them stay, you’re sending a signal to everybody in the company that you don’t like this activity, but you’ll tolerate it.

In the end, part ways gracefully and call an immediate meeting with your team. Explain what happened, how it happened, how you caught it, and ask them for feedback on how to prevent this kind of bullshit in the future.

Set a strong example. Fraud won’t be tolerated.

The team will appreciate your honesty and transparency. They’ll trust you. And they’ll know that you’re a strong founder, CEO, or sales director. You’re a leader. You’re somebody that will protect them from salespeople who work against your team, your company, and your customers.

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