Dear SaaStr: How Many Sales Reps Do I Need?

You can back into it.

  • 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 leaders and sales engineers are cost centers here. Assume 1 sales manager for each 8 sales professionals, and 1 head of sales development for each 10 SDRs.
  • 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 oto the model.

So

If you want to add say $10m in net new revenue next year, and your deals are say $25k in ACV each, and a $600k quota is reasonable:

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
  • = 22 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.

Net net, I’ve found that almost every SaaS team that is beginning to scale without a VP of Sales … has about half as many reps as they’ll need to hit the plan for next year.

(note: an updated SaaStr Classic post)

More on how and why sales efficiency declines here:

Your Sales Efficiency Will Probably Plummet Toward $10m ARR. Plan For It.

Published on July 25, 2021

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