Maybe It’s Best Everyone Starts as an Individual Contributor

So much has changed the past few years on the people side in SaaS and tech. Perhaps the biggest change though is how many folks want to manage a team, versus do the work themselves.  The 1000+ unicorns of Covid fueled this, with ample capital to hire, hire and hire.  

And so did a bit of laziness that creeped into many of us during the past few years. Things really were easier for many of us in 2021.

The other day I interviewed yet another other great AE who had recently become a Director of Sales. He said he really, really wanted to “go for it now”, get a big house, a new car, and more. I pushed him and pushed him on the role, though. “You know you’ll have to actually do sales yourself at this startup? Not just hire and manage people?”. He finally got it. He took a pause and said, “Yeah, I just don’t want to work that hard."

Then yesterday I talked to a very talented director of customer success who really, really seemed to want a role.  I explained to them the job would entail going really deep with customers, meeting them, and owning the deliverables.  “No thanks,” they said.  “I just want to focus on process.”

I hear this story and this exact phrase again and again these days.  Constantly.

And I also see so many VPs and Directors and Managers flame out when they take a start-up role … and don’t really want to do all the hard work themselves.

I think my best advice is this, in 2024:

Make Sure Any VP You Hire Does The Job Themselves First. Before They Hire Anymore. Period.

In this all-star CMO panel from SaaStr:

• Rick Schultz, CMO at Databricks
• Janine Pelosi, Former CMO at Zoom, and
• Ryan Carlson, Former CMO at Okta, joined
• Carilu Dietrich, Former CMO at Atlassian and Advisor at Hypergrowth B2B Startups

talk about the seven biggest mistakes CMOs make.

These CMOs have all taken their companies from the early stages through IPOs and have been apart of multi-billion dollar organizations. Here are the 7 big mistakes they made, so you can avoid them. 

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So we haven’t checked in on Procore since after its IPO, when it was at $500m ARR.

It’s a true vertical SaaS leader — “Cloud for Construction” — growing an impressive 33% at $1 Billion (!) in ARR now. And it’s a great story of going long. It took Procore years to really take off, and it didn’t take off at all until mobile became the accelerant. Procore in fact was founded way back in 2002.

Today though, it’s worth a stunning $10 Billion. That’s 10x ARR, even in today’s tougher environment and a world of 6x multiples even for many of the best in SaaS.

Why? Strong growth, break-even margins, and very high quality revenue.

So we’ve been focusing on leveling up a lot in our content game recently:

• We do terrific, free, live Workshop Wednesdays with the best in SaaS now, every week at 10am PST.  Bring your questions!
• We’ve added the wildly successful CRO Confidential series with Sam Blond, ex-CRO of Brex and now Partner at Founders Fund
• We’ve upgraded the SaaStr Daily and Weekly newsletters, and they now reach 200,000+
• We’ve added the very popular My App Stack to help you see what top apps leading CROs, CMOs, CEOs, CTOs and more are using themselves!
• We’ve added a new Doubling Down series to get to know the top VCs in SaaS and Cloud!
• And our #1 podcast has cracked the Top 40 on Apple podcasts and Spotify now for 2024!

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At the end of the day, most SaaS companies pay their reps all-in (base + bonus) from 20%-25% of what they close in total comp — base + bonus. Often at roughly a 50/50 ratio.  Sometimes for very transactional, low ACV sales, the percent can be lower. But for deals at, say, $10k and up that’s a pretty standard model.

$500/mo is $6,000 a year so that’s a big enough deal size to support a traditional SaaS inside sales rep:

• Pay 20% of the expected ACV (annualized contract value) in total comp — but that might mean less commission until they’ve covered their base cost for the month. If the rep is on a “50/50” plan then roughly 10% of that might go to their base, and 10% to a bonus on top of that, until they’ve booked a certain amount each month or quarter. So the commission might be, say, $600 until they’ve closed enough revenue to cover their base. Ultimately, it should all solve out to, say, 20% of the bookings goes out to sales comp, one way or another.
• If a month-to-month deal churns / lasts < 12 months, you can claw back a proportionate amount of the bonus.  But it won’t matter that much. But unless churn is high, you’ll see it doesn’t matter that much in the long run. By all means, have a clawback in your sales comp plan (it helps remind everyone of the prize of happy customers), but realize any money you claw back in commissions won’t move the needle.
• If cash is an issue, you can pay reps monthly commissions on monthly deals instead. But try not to do this. E.g., you could pay a $50/month commission for 12 months. Reps don’t love this, but sometimes it’s OK in the early days, and over time, the commissions compound, and reps get OK with it. But it’s a lot of accounting and not really worth it once you are at any scale.
• To make, say, $140,000 — they’d need to close $560,000 over the course of a year (4x), or 116 total deals over the year ($560,000/$6,000 ACV) … i.e., close about 8-10 deals a month. That’s pretty do-able for inside sales. An AE should be able to close 10+ deals a month fairly easily if the leads are there.

Net net, the smaller the deal size, the more of each deal reps tend to take home

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