Wednesday, July 26, 2017

Lesson #270: Benchmarking SaaS Sales Team Metrics

Posted By: George Deeb - 7/26/2017


& Comment

I recently read this terrific blog post by David Skok, an expert on SaaS businesses and a General Partner at Matrix Partners, an early-stage venture capital firm based in Boston.  This post included a lot of terrific sales-related benchmarking metrics for SaaS businesses collected by David and The Bridge Group.  David was kind enough to allow me to share his learnings with all of you.  So, here it goes.

Sample Studied:  The study interviewed 384 SaaS executives.  89% in North America, $20MM median revenues, $25K median contract value, 60 day median sales cycle.

Territories:  Companies keep it simple as long as they can; 61% of companies under $5MM have no territories--which falls to 10% for companies over $250MM in sales.  Companies under $50MM that do create territories, do so: 63% by geography, 23% by named accounts and 9% by industry vertical.

Outside Sales Reps:  Outside salespeople are expensive, especially for lower ticket products where you can't make the lifetime value of revenues exceed the cost of acquisition.  So, no surprise that only 9% of the sales pipeline of a company under $5MM was generated by outside salespeople (leaning on marketing or inside salespeople instead), which jumps to 38% of the pipeline for companies between $50-$100MM in revenues, where they can better afford the costs.

Specialized Roles:  Every client can have up to three people covering them--a sales development rep that close the first sale, an account executive that manages the long term relationship and future sales and a customer success person that manages operational fulfillment.  Only 22% of companies under $5MM have all three roles, which increases to 44% for companies between $20-$50MM.  And, the higher the average order value, the higher odds you get multiple roles filled (8% fill all three roles with under $5K ticket, which jumps to 56% with $100K+ ticket given the higher complexity of the sale).

Location:  24% of companies under $5MM have sales reps in multiple locations, which jumps to 95% for companies over $500MM.  Surprisingly, the cost of that person is largely the same as the home office team, regardless of which market they are operating from.

Tenure:  The average tenure of a salesperson is 2.4 years with the company.  But, that increases with the average order value of the product:  only 8% of salespeople stay with the company over four years in companies under $5K ticket, but jump to 31% with over $100K ticket.  That speaks to more complex sales and the need to retain those selling experts--and, the higher compensation those salespeople are making with no need to look elsewhere for a new job.

Turnover:  The average employee turnover in the sales team was a whopping 30%, half of which from involuntary terminations and half of which from voluntary resignations.  The old adage bears true:  never stop recruiting.  And, what a painful process for your sales managers, having to retrain a third of their sales team every year, and the negative impact that has on sales productivity.

Compensation:  The average compensation was $126K, comprised of a $62K base salary and a $64K commission for on-target sales.  Understanding there is a wide range here, based on average ticket of the product.  But, compensation is steadily rising; the amount of salespeople making more than $120K has increased from 18% to 51% in the last five years.

Quotas:  The average quota was $770K, or 5.3x their total compensation for on-target sales. But, quotas increase with average ticket, from $578K for $5K ticket to $1.3MM for $100K+ ticket.  That assumes selling low ticket products is easy and you should close 115 transactions a year (10 a month) and selling high ticket products is hard, selling only 13 transactions a year (one a month).  Quotas have been increasing about 8% over the last two years, faster than inflation, as companies are asking their salespeople to do more production.

Commission Plan:  On average, 37% of companies offer a flat compensation plan (regardless of sales production), 24% offer a gradually increasing commission plan, 28% offer a sharply increasing commission plan (that accelerates with achievement over plan) and 11% offer a steeply increasing commission plan (often with a sales cliff before material commissions kick in).  I am surprised a third of companies don't tie compensation to performance--please fix that!!

Demos:  The number of demos is dependent on average ticket.  Companies with an averge ticket under $5K do 11.3 demos a week (closing around 25% of them) and companies with a ticket over $100K do 3.6 demos a week (closing about 7% of them, on average).  I am surprised the close rate was not higher than 10% in all cases, which I typically shoot for.  That is the difference of 43% more sales!!

Tech Spend:  Excluding the base CRM costs, the average salesperson spends around $477 on additional software to help them with their jobs.  That typically gets you email automation, contact data appending, contract e-signatures and LinkedIn's Sales Navigator tools.  The more sophisticated companies spend an additional $500 to get call recordings and conversion analytics tools.  The below chart shows even more advanced technologies which are early in their adoption curve.

Titles:  Titles materially vary by size of company--a VP in a small company may be the equivalent experience of a Director in a medium company or a Manager in a big company.  The most senior person in a company under $20MM is typically a VP or CXO, 45% of the time.  Where the most senior person in a company over $100MM, may have the Manager title, 71% of the time.  So, be careful how your craft your job postings and ask smart questions during interviews to make sure you are not comparing apples with oranges.  As a rule of thumb:  Directors are great strategists/leaders, Managers are great coaches and Team Leaders are great role models in a hybrid contributor/manager role.  Team leaders typically manage a team of 7.2 account executives, excluding themselves.

Struggles:  I am guessing you are all in good company here.  49% of companies struggle with team productivity/performance; 30% with recruiting/hiring; 26% with onboarding/training and 19% with forecast accuracy.  Numbers which have not materially improved over the years, despite all the advancements in technology.  Driving sales is never easy.

Hopefully, you agree that are some great sales benchmarking metrics herein, which can help you in managing your own SaaS sales organizations.  Thanks again, David, for allowing me to share some of your insights with our Red Rocket readers.  Be sure to read the full blog post for more details and you can follow David on Twitter at: @bostonvc.  Happy hunting!

For future posts, please follow me on Twitter at: @georgedeeb.

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