The data about average sales-team size in this post comes from our ongoing benchmarking analysis of hundreds of B2B SaaS companies. We will be releasing more benchmarks and key findings over the next few months.
It’s a word you hear a lot when you talk to startup executives and founders. Building a nimble, adaptable, scalable team necessarily means building a balanced team, and SaaS startup founders are always trying to achieve the perfect balance for their teams.
And, in this sense “balance” is really another way of talking about “proportion”. What proportion of my company should be engineers? How big should my marketing team be in proportion to my customer success team?
These are incredibly important questions, with serious consequences for your company’s success. And these questions are especially pertinent as your company grows and matures.
Dedicating the bulk of your headcount to engineering, for example, may help your company get off the ground in the early days, but it could hurt you when it’s time to go to market. Likewise, hiring a bevy of marketers before your product is ready to ship may result in a failure to launch.
But there’s one functional unit where the question of balance and proportion comes up more than any other: Sales.
Sales is the chief revenue driver of a company, so it’s important that you have the right number of reps to bring in enough deals to hit your number. However, closing reps are expensive (and they don’t help you market to new, or retain existing, customers), so it’s equally important not to have more than you need. This is a difficult needle to thread, so it’s no wonder that SaaS leaders struggle to find the right balance in terms of how big their sales team should be as a proportion of their company’s overall headcount.
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And it gets even more complicated.
Right-sizing your sales team is itself a balance ‒ between the general business philosophies about ideal company composition and the specific needs and goals of your particular company.
Typically, when SaaS businesses decide how many Account Executives (which we’re using here to refer to any quota-carrying sales rep) to bring on, they focus on the second part of this equation: They work backwards from their company’s specific growth goals to devise a suitable capacity model that takes into account quotas, employee attrition, time-to-ramp, etc. (For a full breakdown of this process, check out this comprehensive account from InsightSquared’s Business Analyst or this awesome post from Tomasz Tunguz on modeling your SaaS sales team based on marketing output.)
This process allows SaaS executives to ensure that they have the right number of AEs to hit their goals and work the leads marketing is producing, but it misses an important part of the equation: context.
How Does the Size of My Sales Team Compare to Similar Companies?
Context is especially important in this case because capacity planning is notoriously difficult and susceptible to poor goal-setting (especially for young, high-growth companies, for whom revenue projections are often inaccurate). For this reason, it is essential for young companies to gut-check their model with actual industry benchmarks about sales team size. Models are great in the sterile, theoretical world of capacity planning, but in the real world it’s important to have hard data about how actual companies look. Otherwise, a slightly misguided model could jeopardize your SaaS business for years to come.
But there’s a problem. There really aren’t any reliable industry benchmarks out there that provide meaningful information about how big a SaaS sales team should be relative to overall company size. And what information there is is typically outdated or overly general.
This information gap makes it almost impossible for SaaS executives to feel confident when building their companies. Too often, they rely on overly general data or their gut, which is a perfect recipe for an out-of-proportion company.
At InsightSquared, we don’t put too much faith in conventional wisdom or “close enough” strategies so we set out to answer this question for ourselves.
First we created a survey to poll startups about how their organization’s structure evolved as they grew. The results helped us gut check our own model to see if we were relatively in line with other successful SaaS startups.
But we wanted to go further.
We analyzed 70 SaaS companies to see how the size of sales teams (relative to overall headcount) relates to: