How Many Sales Reps You Really Need for Next Year

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More than you probably would think.  Even in this age of more efficiency, at least at scale.

You can back into how many sales reps you’ll need in SaaS. Not enough founders especially do this during the annual planning process:

• 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, 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.
• 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.
• 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, 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.

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No.

First, there’s a good chance it’s at least 1% your fault.

Rarely in an auto accident is one party truly 100% at fault. Are you sure you didn’t hide something, even inadvertently? That you were totally upfront about that issue with your co-founder? Etc. etc. We talked about 10+ reasons deals fall apart the other day. You’re likely at least 1% to blame. Perhaps not. But likely.

So if it’s even 1% your fault — you’ll look bad “spreading the word.” And it won’t get you anywhere.

Two, no one will care.  Not really.

I know, but the thing is, someone else will still take their money. Also, no one really thinks VCs are saints.  It’s a tough business, with sharp elbows, and half promises. Everyone knows this. If you refuse to work with VCs that have never done something remotely questionable — your VC network will end up being close to zero partners.  I’ve later co-invested with VCs that treated me pretty poorly, at least IMHO. I doubt they ever realized they did.

Three, let it go.

As founders, we have to let a lot of stuff go. It’s hard. Man, it’s hard. But let it all go. Move on and focus on your business. Not this one episode. Save your energy for stuff that really matters. This doesn’t. It feels like it does, but in the end, it’s just a deal that didn’t happen.

So I don’t think founders need to understand everything about how VC works, but is is helpful to understand the key drivers and metrics,

And this one is interesting. Per Pitchbook, the “top” 30 VC funds raised 75% of all the VC capital raised this year.

And really, they consumed it. Because there is just only so much capital available for VCs to raise from LPs, to then give to founders. It’s a finite pool, and it’s large, but not as large as many founders might think.

Now, at the earlier stages, seed especially, there are a ton of funds, often < $100m in size. They don’t consume all that much capital, and are bunched under “other emerging managers.” That’s still a lot of money.

But as you grow, and look to raise more capital, understand it’s a relatively small community of VCs at that stage. May as well get to know them early.

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The best parts:

• Having a great team. Once you really have a great team, not just some great individuals — magic happens. It’s truly special.
• Lifelong relationships with the team. Building long-life friendships grounded on a multi-year journey together. Pretty powerful.
• Relationships with other CEOs. The ones you went through it all together with.  You’ll be connected for many, many years to come.
• The victories. The first $1m ARR. The first $1m day. The first $1m customer. We don’t celebrate these victories enough, but they never get old.
• Always something important to do. You’re never bored. It’s more than this, but when you’re on that journey together, truly building something — you’re never bored. Sometimes tired. Even a little burnt. But never bored.
• Always challenged. This can be stressful, and tiring. But if you’re scaling a tech business, the pace of change always challenges you.
• Builders gotta build. My most unhappy stretches have been when I haven’t been building. Being a founder solves this.
• Not working for “The Man”. The benefits here are real. You’re in charge of your own destiny, at least in part.
• Keeps you young at heart — and curious. A curious mind keeps it all going.

What’s that?  It’s a way of summarizing the combination of current growth, TAM, and future prospects into where things are going.  E.g.,

• “Yes, it’s early, but there’s a clear path to $10m-$20m ARR just doing what they are doing today.”
• ”There are challenges, but with that level of growth, there’s a clear path to a unicorn round”
• “They’ve done a great job getting here, but I just don’t see a clear path to $100m ARR”
• ”Without a second product, I don’t see a clear path to IPO”

Etc. Etc.

While it can be more than annoying to hear all your hard work as a founder reduced to how “clear your path” is to the next stage, it’s actually an incredibly useful heuristic for communicating.

Not just to investors, but to your employees, partners, and team.

Because it doesn’t really matter where you are today for your team.  It matters where you are going, and how you are going to get there.

My strong advice is speak with data.

And that may mean at first — not speaking too much!

Here’s my suggestion for the first 30 days:

• Visit as many customers as you can. Try to visit at least 10 in person, and …
• Talk to as many customers as you can. Zoom with another 10–20.
• Listen in on as many sales calls as you can. Also listen to as many Choruses and Gongs as you can.
• Listen in on as many customer success calls as you can. Hopefully, there are many!!
• Answer 100 support tickets. Do at least 4–5 stints on support. Ideally, more. Trust me. Do it.
• Start a weekly webinar for existing customers AND prospects — and listen. Ask for open-ended questions at the end.
• Ask the sales team to force rank their Top 10 feature requests.
• Ask the dev team to force rank their Top 10 pieces of technical debt.
• Publish your product roadmap. This will force folks to align.

And most importantly, don’t under hire for this role.  I see this again and again.

Up Next: Wednesday, December 18th @ 10AM

Topic: Your Guide to Going Multi-Product Earlier 

Speaker: Dennis Lyandres, Former CRO at Procore and Advisor at ICONIQ Capital

Workshop Wednesdays is our weekly series where we’ll be bringing some of the best SaaStr speakers to you LIVE, every Wednesday. 

Each workshop will be hosted in a live, interactive 30-minute format at 10am Pacific each and every Wednesday. This workshop will be 100% LIVE, not pre-recorded, and will be hosted in an, interactive 30-minute format, including Q&A.

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