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How to structure a sales team


Dear SaaStr: How Many Sales Reps Do I Need?

More than you probably would think.

You can back into how many sales reps you’ll need in SaaS.

  • First, figure out how much revenue you need to close in the next twelve months. Because that’s more than now.

  • Start by setting a clear revenue target for the upcoming year.

  • This target should be an increase from the current revenue, accounting for growth goals and market potential.

  • 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+.

  • Quotas should be based on deal sizes and market dynamics.

  • For small deals, a $400k annual quota may be challenging but feasible.
  • For medium-sized deals, aim for $600k-$700k per rep.
  • For larger deals, consider $1 million or more.
  • These figures need to be adjusted based on your specific market, product, and sales cycle.

  • 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.

  • Recognize that not all reps will meet their quotas.

  • A conservative estimate is that 75% of reps will hit their targets. However, this may vary (60%-75%) depending on the speed of scaling and hiring accuracy.
  • This factor accounts for the learning curve and the inherent unpredictability in sales performance.

  • 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.

  • Include the cost of sales management, operations, and support staff.

  • A common ratio is one sales manager per eight sales professionals.
  • This ratio ensures adequate support and oversight for the sales team.

  • 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 so in theory, 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.

  • More specialized sales processes require additional roles like Sales Development Reps (SDRs), Business Development Reps (BDRs), and Sales Engineers (SEs).

  • While higher quotas should ideally cover these specializations, in practice, additional headcount may be needed.
  • This could add approximately 20% more to your staffing model.

Page last modified: 2023-11-18 12:11:19