Dear SaaStr: What are the signs that an enterprise B2B startup is ready to scale by hiring more sales people?
In the early days, it’s simply that you have a few more leads than you can currently handle.
For a higher-velocity, in-bound driven B2B product, most sales reps will have trouble doing more than a 3-4 demos a day and processing more than 50 or so truly qualified leads a month.
There are only so many demos, so many Zooms, so many follow-up calls you can do. Maybe they can do 100 if they are really working hard, but even there, the revenue per lead will often fall: Why Lead Velocity Rate (LVR) Is The Most Important Metric in SaaS | SaaStr
50 qualified leads a month x 3 interactions per lead = 100-150 hours of work. Plus following up on the 50 qualified leads from the month before. And the month before that. Pretty soon, everyone just gets dropped into an automated cadence. And pretty soon, every lead that doesn’t look “hot”, like it has a high likelihood of closing … doesn’t really get any attention.
So roughly, if your deal size is in the $5k-$20k range, as you approach 50 qualified leads per rep per month … hire more reps.
Later, as you approach $8m-$10m ARR, it will flip around. You’ll start to have a pretty fine sense of your lead and opportunity velocity, and sales will become a capacity game. You’ll start to learn how much ARR you can close per rep (often in the $400k-$800k range, depending on deal size), and it will be about putting trained bodies in seats.
Put differently, after $10m in ARR or so, if you have a real engine going, then yes, more salespeople will = more sales, to an extent. To a point. Your revenue growth will be sales capacity-driven (with lead generation of course critical as well, but #2).
Before $10m ARR or so, more qualified leads = more sales. Just make sure you hire enough salespeople to keep up with the leads, that’s all. Growth will be lead generation-driven (with capacity importantly, but following).
The difference can feel subtle until you’ve been through it, but it’s critical.
