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Dear SaaStr: How Many Sales Reps Do I Need?

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Dear SaaStr: How Many Sales Reps Do I Need?

More than you probably would think.

You can back into how many sales reps you’ll need in SaaS.

  • First, figure out how much revenue you need to close in the next twelve months. Because that’s more than now.
  • Second, calculate a reasonable attainable quota for your closers, your Account Executives. This is generally derivate of your deal size. If you do small deals, reps may struggle to close $400k a year. Middle size deals, $600-$700k. Bigger deals? Maybe $1m+.
  • Third, multiple a yield factor. Not all reps will work out. And they will take at least a tiny amount to scale. To be conservative, assume 75% yielded quota.
  • Fourth, add “load”. Your VPs and Directors of Sales and sales ops and rev ops leaders and sales engineers are cost centers here. Assume 1 sales manager for each 8 sales professionals.
  • Fifth, the more specialized the sales process is, the more folks you’ll need. SDRs, BDRs, etc. But in theory, higher quotas should “pay” for specialization so in theory, this won’t impact headcount too much. But in practice it often adds 20% or so to the model.

So

If you want to add say $10m in net new revenue next year, and your deals are say at $25k in ACV each, and a $600k quota is reasonable (and that’s not that low, really):

You’ll need at least:

  • 16 fully-scale AEs just to do the work ($10m/$600k)
  • 4 SDRs to screen the deals
  • 1 VP
  • 2 Managers
  • 1 Sales/Rev Ops (at least)
  • = 23 heads / .75 yield = 30 sales professionals.

30 sales professionals to add that net $10m in new revenue, even with a $600k quota!

You’ll also note in this how & why sales efficiency drops over time. In the early days, you don’t need as much management, and your effective yield is often higher. Just scaling here alone will drop your sales efficiency 30%+ even if everything else stays constant.

Plan for that.

A deeper dive here: Why Your Cost of Sales Generally Doubles As You Scale | SaaStr

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(sales team image from here)

Published on June 27, 2022

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  • Source: https://www.saastr.com/dear-saastr-how-many-sales-reps-do-i-need/

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