Getting to Initial Traction

What Your First 100 Hires Will Look Like

echojason@gmail.com'

Jason Lemkin

There’s an exercise I’ve been through with many founders that are just getting to Initial Traction, say $1m in ARR or so, sometimes less, where I map out their future hiring.

100_employee_mark_2They are often a bit shocked at how many people they are going to need to hire.  Because SaaS requires so many functions beyond engineering, especially if it’s sales-driven … outbound, SDRs, inbound, field sales, marketing, customer success, support, more complex product management, etc.

Roughly speaking, most founders will need to hire about twice as many people as they’d planned.

So let’s break it down.  Let’s say you are at $10m ARR and decently funded, you’ll probably have 100 headcount by this point, or at least, by $15m ARR.  What will it look like, if it’s a sales-driven model?

Let’s say its growing at say 100% annually and you wants to hit say $20m ARR the next year.

So on the Sales side we’ll need about 40 headcount at $10m ARR (to grow 100% the following year):

  • 1 VP of Sales, and probably a VP or Director of Sales Ops, and at least one analyst under her (3)
  • talkdeskcloseroftheday
    Talkdesk inside sales team at $10m ARR

    Say 20 sales reps to fully hit the $20m ARR plan because we’re adding $10m in ARR next year, and more by the end of the year.  (That’s a yielded quota).  Really, we’ll want more than this toward the middle of the year because we’ll be adding so much net new bookings / MRR.  Budget for 25 at least.

  • Maybe 8 SDRs to support the sales reps in outbound, screening, etc.  Situations vary wildly, but a 1:3 ratio is good for modeling purposes.
  • Probably 3-4 Sales Directors to manage the 25 reps (8 reps per director is a standard ratio that works well), and the SDRs (8-10 per director; usually SDR managers can handle more reports than AE managers).
  • I’m not even breaking this down between in-bound and out-bound, or adding a distinct field sales function.  You’ll probably want to add field sales (for Big Deals) by $10m ARR or so, another 2-3 headcount here, minimum.
  • Yes, I know this is a lot more than you’d thought.

In Customer Success, we’ll probably need about 20 headcount:

  • Assume $1.5m ARR per CSM.  So we’ll need about 15 CSMs to hit our plan for next year, although we can hire some later in the year, so we can call it 15 for now, and
  • A VP to manage them, 2 directors to manage half of the CSMs each, and probably an analyst to support her in data analysis, etc. (4).

In Marketing, it can vary based on outside vendors, but I’m guessing 4-8 employees:

  • VP Marketing
  • Director Demand Gen
  • Director, Field Marketing (events, etc.)
  • Content Marketing
  • Product Marketing
  • Probably, marketing’s own lead qualification reps to manage the MQLs (2-3).

In Support, we want 24×7 support at this point, including phone support.  Let’s assume that takes 5 headcount, minimum, ideally 6.

>> OK we’re up to ~70 without a single engineer!

Now let’s cross over into product and engineering:

In Product, we’re going to need at least 4 FTEs, and even that isn’t much fat:

  • A VP Product to manage the whole thing
  • 2-3 Product Managers to manage segments of the product, integrations, releases, etc.

In DevOps/TechOps, we’re going to want probably 3-4 folks just to ensure 24×7 coverage.  Really, 4 would be a lot better than 3.  PagerDuty is tiring.  Should we count DBAs etc. in here?  Maybe it’s really 6-7.

In Engineering, I think rough-and-tough we’ll want 20 folks.  That’s two “pizza box” teams plus a few engineers to do crazy / next gen stuff and a few to just focus on refactors, back-end, etc.  We’ll want 2 designers that can work with front-end team by this point.

And finally, we need QA, probably at least 8 QA engineers + 1 manager.  You can use RainforestQA or something else to get the headcount down, but otherwise, best case assume 1:2 coverage.  So with 20 engineers writing code, we’re gonna need 8 folks on QA team minimum once things are humming, plus a boss for the team.

So that’s about 40 in product and engineering you’re gonna want at $10m ARR or so.

Or 110 altogether.  Plus whomever you need in G&A, finance, etc.

I went over 100 a bit, I know, so cut back from there proportionately.  But you’ll need those extra heads to hit your growth plan.

Note that I have a lot more in sales+marketing+customer success that your typical model looks like if you compare to public comps (~30% in sales and marketing by revenue).  But that’s often because they are growing more slowly at that point on a percentage basis than you, have larger quotas, and/or aren’t investing as aggressively in customer success.

In other words, assume the majority of your headcount at $10m ARR is not building product, but helping to sell and market and support it.

…..

See also this great post from InsightSquared on their ratios and headcount, as well as Hubspot’s.  Hubspot is a bit more SMB-y than the model above, and is at $100m+ ARR … but both are good comps.

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100 employee image from here

Published on July 9, 2015
  • Hello Jason,

    I have seen a couple of your interviews and read your articles and you often say that once you get the initial traction ($1 million) all companies scale the same way.

    Looking at your hiring schema, I understand that the way you scale it is with a sales force. I understand that, but I see you only have 4-8 employees for marketing. My thought was that your marketing team was the one who nurture with leads your sales team, but you say you only need 4-8 employees on marketing compare with 40 on sales.

    Am I missing something or once you get initial traction leads generation is not so important and what matter is a sales team with contacts ?

    Thank you!

    • At our company, which about 25% of the size of the example provided, the sales-marketing split is very similar.

      For us, marketing doesn’t actively engage prospects, that’s the job of the SDRs. We’re growing our sales department right now, and the ratio of SDR:AE is working out to be around 1:2, which, with our existing lead count, gives SDRs enough time to follow-up.

      For lead gen, our marketing department focuses heavily on SEO, trade shows, and marketing automation.

  • Shushannah

    You’ll need far fewer QA engineers if you use Rainforest QA’s QA-as-a-service API 🙂

  • Quick question – do designers & UX folk fall under Engineering?

  • Hi Jason, this is a very interesting article. I’m curious what does the hiring plan look like for a company that’s focused on selling enterprise solutions? For example, SaaS solutions that require an implementation team or a longer setup process (think Veeva or Apttus vs Slack). Would that still be a sales – driven model? Or would the CSMs cover setup services?

  • Thank you for this personnel breakdown. It’s tailored for a software company but I wonder how different it would look for a hardware company. It would probably have to add positions for manufacturing and supply chain management, if those functions are kept in-house during the startup’s growth phase.

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