Dear SaaStr: What are the signs that an enterprise SaaS startup is ready to scale by hiring more sales people?
In the early days, it’s simply that you have a few more leads than you can currently handle.
For a higher-velocity, in-bound driven SaaS product, most sales reps will have trouble processing more than 50 or so truly qualified leads a month.
There are only so many demos, so many Zooms, so many follow-up calls you can do. Maybe they can do 100 if they are really working hard, but even there, the revenue per lead will often fall: Why Lead Velocity Rate (LVR) Is The Most Important Metric in SaaS | SaaStr
50 qualified leads a month x 3 interactions per lead = 100-150 hours of work. Plus — following up on the 50 qualified leads from the month before. And the month before that. Pretty soon, everyone just gets dropped into a crappy cadence. And pretty soon, every lead that doesn’t look “hot”, like it has a high likelihood of closing … doesn’t really get any attention.
So roughly, if your deal size is in the $5k-$20k range, as you approach 50 qualified leads per rep per month … hire more reps.
Later, as you approach $8m-$10m ARR, it will flip around. You’ll start to have a pretty fine sense of your lead and opportunity velocity, and sales will become a capacity game. You’ll start to learn how much ARR you can close per rep (often in the $400k-$800k range, depending on deal size), and it will be about putting trained bodies in seats.
Put differently, after $10m in ARR or so, if you have a real engine going, the yes,more salespeople will = more sales, to an extent. To a point. Your revenue growth will be sales capacity-driven (with lead generation of course critical as well, but #2).
Before $10m ARR or so, more qualified leads = more sales. Just make sure you hire enough salespeople to keep up with the leads, that’s all. Growth will be lead generation-driven (with capacity importantly, but following).
The difference can feel subtle until you’ve been through it, but it’s critical.
