Dear SaaStr: What Is The Optimal Structure of an Initial SaaS B2B Sales Team?
“Simple”.
The optimal structure is one that is accretive. Where, roughly speaking, each sales rep brings in at least 4x-5x the total compensation they take out.
If the average sales rep produces >5x the comp she takes home, then:
- a SaaS company should be able to be cash-flow positive, at least by $4m-$5m in ARR, or at least should have the option to be;
- you should be able to hire as many great reps as you can find, since the good ones are all accretive;
- sales will not be a stress center from a cash perspective;
- marketing costs can be managed;
- SDRs, specialization, and account management can all be funded; and
- it all “works”.
The sales-driven SaaS companies that are very capital efficient generally end up at 4x-5x or greater as a ration of average quota attainment / average OTE.
Where you burn a ton of cash is “buying” sales.
Shoving sales reps into segments where you don’t have enough leads / enough demand. “Starving” reps with too few opportunities. Brutal head-to-head competition in areas you might not otherwise compete.
Buying sales isn’t bad. It works. If you can raise a ton of capital, it’s one strategy to win and crush the competition.
But whatever you do, make sure you know the game you are playing.
Sales doesn’t need to be a cost center. It can be, and for at least more of the life of your company, should be, a profit center. That pays for the rest of the company. Not vice-versa.
A bit more on the next stage here:
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Jason Lemkin, Khareem Sudlow
