Until founders have real help on the ops side, I usually see everyone get wrong the calculation of how many reps they need. And it’s almost always more than first-time founders think. You can back into it:
- 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, multiple a yield factor. Not all reps will work out. And they will take at least a tiny amount to scale. To be middle-of-the-road, assume 75% yielded quota. Assuming a 60% yielded quota to be more conservative. Really. I know your first 3 reps are scaled and are crushing it. Great. Do not assume that going forward.
- Fourth, add “load”. Your VPs and Directors of Sales and sales ops leaders 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, etc. But in theory, higher quotas should “pay” for specialization so in theory, this won’t impact headcount too much. But in practice it often adds 20% or so to the headcount in the model.
If you want to add say $10m in net new revenue next year, and your deals are say $25k in ACV each, and a $600k quota is reasonable:
You’ll need at least:
- 16 fully-scaled AEs just to do the work ($10m/$600k)
- 4 SDRs to screen the deals
- 1 VP
- 2 Managers
- = 22 heads / .75 yield = 30+ sales professionals.
So here you need 30 sales professionals to add that net $10m in new revenue, even with a $600k quota!
Or probably at least twice what you were thinking. It seems it’s always like twice what you were thinking.
You’ll also note in this how & why sales efficiency drops over time. In the early days, you don’t need as much management, and your effective yield is often higher. Just scaling here alone will drop your sales efficiency 30%+ even if everything else stays constant.
Plan for that.
(Cross-posted @ SaaStr)