How Big Should Your Sales Team Be?

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.

Just like the first question we answered, this is an extremely common line of inquiry. As your company ages, it also changes shape. In the early days, a nimble crew of engineers and sales reps was enough to keep the lights on. But a year or two down the road you’re likely to need a more diverse set of employees, regardless of your company’s headcount.

That’s why it’s important to compare your company to others that were launched in a similar time frame. It’s also important to look ahead: 5 years from now, what percentage of your company should be closing deals?

Here’s what the data revealed:

What it tells us Like company headcount, your company’s age is likely to have a big impact on the proportion of employees closing deals. In fact, the story is very much the same: young companies have upwards of 30% of their team closing deals, while older companies dip to 20% and below.

This is very much in line with the findings from the previous section, and for good reason. As companies age, they tend to become more complicated and functionally diverse. They add more non-closing salespeople (like Business Development Reps, Sales Managers, and Sales Ops professionals) as well as more employees completely outside the sales function (like customer service reps, account managers, and accountants).

The speed of this change, though, is fairly impressive. Even across a sample size of nearly 70 companies, it’s easy to see how every year counts. For each year of a company’s lifespan (within the first 10-15 years at least) you can expect a non-negligible decline in the number of sales reps proportional to total headcount.

To summarize:

Like overall headcount (although not quite as extreme), your company’s age has a big impact on the size of your sales team relative to overall headcount.

At this point you might be asking “Ok, I understand how my sales team size should evolve as my company ages and adds employees, but what about the most important factor: money?”

Thanks hypothetical reader, this is a great question! How much money your company is bringing in is even more indicative of its maturity than either its size or age. Therefore, if we want a real answer to the question of “how big should my sales team be?” we need to look at overall bookings.

So we did.

Nothing dictates the decisions your company makes as much as revenue. That’s why, if you’re trying to determine whether your sales team is the right size, you need to look at how much money it’s bringing in.

When we analyzed company composition based on annual bookings, the data supported the trend we had identified in the other analyses.

Here’s what we found:

What it tells us

In short, analyzing sales team size by annual bookings tells the same story as the other analyses:

as companies mature, the relative size of their sales team drops. In fact, the trend is even more stark when analyzing by annual bookings. Companies that have really arrived at scale (bringing in more than $10m in annual bookings) have the smallest relative sales team of all, at just under 17%. (For reference, this is in line with the oldest companies [those founded before 2000] and a tad lower than even the largest companies [with more than 150 employees]).

It’s also worth noting that most companies hope to achieve an economy of scale as they grow. The hope is that their sales team becomes more efficient at bringing in deals over time and, therefore, doesn’t need to grow linearly with bookings growth.

The trends that emerged from our analysis of relative sales team size are quite clear: Smaller, younger companies have proportionally larger sales teams. The percentage of AEs begins at around 35-30%, then drops gradually before leveling off at 18-20% for larger, more mature companies. 

In all of the age and size cohorts we measured, the proportion of AEs to total employees never dropped below 17%, even for the largest, oldest companies with the most revenue.

When analyzed in aggregate, the trend tells a fascinating story: Sales headcount is particularly important early in the game, as companies devote a lot of energy and resources to securing their first customers. As they mature, however, these companies tend to emphasize adding headcount in other (not necessarily revenue-generating) business units like customer success and finance. Or, relatedly, they tend to flesh out their sales team with non-closers, like Business Development Reps and Sales Ops roles, who are not actively closing deals or owning opportunities.

This information may not change the way you determine how many AEs you need, but it can be a great way to gut-check your model and help fill in any gaps it may have. This is especially important for fast-growing startups, where revenue modeling is especially inexact. Using this information as a general guideline for modeling operating expenses, however, is a good way to start planning for future growth.