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?
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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 And what information there is is typically outdated or overly general.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.
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.
3 Ways to Benchmark the Size of Your Sales Team
My company just hit 100 employees, and almost 40 of those are sales reps. Is that too much?”
This is a common question among SaaS founders and, as we discussed, one that is notoriously tough to answer. The composition of your company depends on its age, go-to-market strategy, and target customer, so it’s hard to definitively answer the question of “what percentage of my company’s headcount should be in sales?”
But the truth is that there are some rough guidelines to help you think about answering this question for your own company.
In fact, when we crunched the numbers, we found an interesting story about how the relative size of a sales team changes as a company grows.
Here’s what we found:
sales teams shrink relative to overall headcount.
This isn’t too surprising. Small companies have ambitious growth goals, and it’s incredibly important for them to get initial traction in the market, so the sales department is one of the first functional units to see an early increase in headcount. (It’s worth noting that very, very small companies are more likely to include non-sales reps as opportunity owners in Salesforce, as everyone [even executives] sometimes to have to chip in to close early deals.)
But what is even more interesting is how the proportion of sales reps to overall headcount declines and then levels off as companies grow. Again, this rings true: once SaaS startups have gotten to a certain point of recurring revenue, other departments (like customer success and finance) tend to proportionally grow. This eats into sales’ headcount dominance, but it only goes so far: even huge companies dedicate about 20% of their headcount to AEs. You always need to sell your product after all.
To summarize: More than 40% of the headcount at very small SaaS startups is dedicated to AEs, but this proportion shrinks as companies grow and devote a larger share of their headcount to other, more steady-state functions.
But overall company size isn’t the only way of measuring your company’s maturity level. Your company’s age is another useful way to think about how your company’s composition changes over time.
My company is now 5 years old ‒ how large, relatively speaking, should my sales team be at this point?”
My company is bringing in $5 million a year in bookings ‒ is my sales team big enough to keep up with that growth?”