Dear SaaStr: At What ACV Can We Afford a Sales Team?
Even with a very efficient team, it’s tough to afford a sales team much below $299 a month / $3k a year. At least in the U.S. and Western Europe.
Now, if you’re average price point is higher, you can still afford to go a bit lower to expand the bottom of your market. For example, you might be willing to have worse unit economics on a $99 a month deal if your average deal is $10k a year, and some of those $99 a month deals grow into $10k+ a year deals.
And if you get a bunch of revenue from self-serve, you can also probably push the number down a bit and use the self-serve revenue to justify somewhat lower economics on the sales-driven business.
This is what Asana did, for example, with a blended self-service and sales-led motion for an average ACV of about $3k:
Why?
- Let’s assume the reps keep 25% of the total amount they close in salary and commission. That’s about the max anyone can afford.
- Then, to make say, $100k a year as an SMB rep, you then have to close 4x that (or more), so say $400k a year, maybe more.
- At a $3k ACV, that’s 133 deals a year, or 10–15 per month.
- That’s doable. But with demos, follow-up, etc. it’s hard for most sales reps to close more than 10–15 deals a month.
- Even if you close 20% of your deals, that means managing 50-100 deals a month. That’s a lot if you need to do multiple demos, follow-ups, etc. Do-able with a 1-2 call close process, but hard beyond that.
Sometimes, super efficient teams can do more, no doubt. But only so much more.
A bit more here:
And another earlier example from Gorgias, in how they make SMB SaaS work for 10,000+ customers at a relatively low SMB:
