How Many Sales Reps You Really Need for Next Year

Dear SaaStr: How Many Sales Reps Do I Need for Next Year?

You can back into how many sales reps you’ll need in SaaS.  Not enough founders especially do this during the annual planning process:

• 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, multiply a yield factor. Not all reps will work out. And they will take at least some time to scale. To be conservative, assume 75% yielded quota.  I.e., that only 75% of your reps, as a group, hit their quota.  That may actually be high, especially if you are scaling quickly and make a few hiring errors.  60% is OK, too.
• 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, SEs, etc. In theory, higher quotas should “pay” for specialization, and this wouldn’t impact headcount too much. But in practice, you can’t ask AEs to pay for the help they can closing.  So it often adds at least 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!

Most founders underestimate this by 30% or even 50%.  And you end up with not enough headcount.  Sometimes, that’s OK if your head of sales has a good pipeline of candidates. You don’t want to hire too quickly.

But at least budget properly for it.

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.