The foundation of a successful sales organization lies in having the right team - The perfect blend of Sales Development Representatives (SDRs) and Account Executives (AEs) forms a well-oiled sales machine, driving company revenue growth, but how do you strike the right balance when building your team?
How do you ensure that your sales team contributes to your company's revenue growth the way your board expects? How do you keep performance in line with expectation?
The answer lies in developing an effective sales headcount & hiring plan.
Sales capacity planning has become a complex exercise, with a myriad of factors to consider, including changing market dynamics, shifting lead volumes, and fluctuating deal sizes, which all add layers of complexity to the planning process. The traditional top-down approach of dividing a company's revenue target by each salesperson's goal no longer cuts it, and what you need is a more sophisticated, data-driven approach to sales capacity planning - one that adapts to shifting market conditions and keeps you on track towards your revenue target.
We'll explore the different aspects of sales capacity planning that you need to consider, delving into the roles and responsibilities of different sales team members, and how the balance between lead generation and deal closing should be delicately planned.
1. Understanding the Roles: SDRs vs. AEs
Before you embark on your sales headcount planning journey, it's crucial to understand the roles and responsibilities of different team members in your sales organization. Previously covered in detail, an efficient approach to sales comes from mastering the delicate balance.
Often given alternate names such as Business Development Representatives (BDR's) for generating pipeline, and Sales Managers for managing deals & opportunities, we'll keep things easy with the following two widely used role:
Sales Development Representatives (SDRs)
SDRs represent the front-line warriors of your sales process. They're responsible for prospecting, cold calling, and nurturing potential leads, working closely with your marketing team to identify potential customers and qualify leads. Their primary role is to ensure a steady flow of qualified prospects to your AEs.
Account Executives (AEs)
AEs focus on closing deals and bringing in revenue. They take over the qualified leads from your SDRs, understanding customer needs, presenting solutions, negotiating contracts, and closing sales. They are typically more experienced and skilled in consultative selling techniques, relationship building, and navigating complex buying processes.
These aren't the only two roles, and in sales processes aimed at more enterprise organisations it can make a lot of sense for a more hybrid approach to exist, it might also make sense that the promotion path between SDR and AE involves a hybrid approach to enable for a softer ramp.
2. Understand Revenue Targets & Capacities
Typically cascaded downward, getting a handle on targets early on is critical. The last few years have show that targets don't always match up with the reality of what is possible, and so should be carefully pulled apart.
The best way do doing this is with a bottom up plan, essentially starting at the opposite end to targets - Demand (and opportunities)
Opportunity Generation Capacity
A function of your marketing and outbound capabilities, your opportunity capacity is really what dictates how much revenue you close.
If you require 100 opportunities to get to target, and your efforts are only capable of generating 50 opportunities (falling 50% short) it's highly unlikely that you'll land much further than 50% attainment.
Sure you can work harder on those opportunities and maybe push for better than 50%, but doing better would require getting higher than current conversion rates.
Ask yourself this: Can you really double your sales conversion overnight?
Revenue Closing Capacity
Potentially understating how important this metric is, but it's more in-line with the more traditional spreadsheet plans, where you make sure that quota coverage matches your targets - This capacity is essentially the capacity of your teams to handle the volume of opportunities that are needed to get target.
There's 2 ways to approach this however:
Match to quota coverage - The headcount matches what is needed to hit target
Match to Opportunity Generation Capacity - This is a more efficient way of growing, and ensures that you're not wasting money on excess AE capacity. This route will see considerably higher individual attainment (and sales team satisfaction), however might not result in the team hitting company revenue target.
It's worth highlighting in no.2 where the approach doesn't hit target, it's not the fault of the sales team - To get to that you need to tick both boxes of Opportunity Generation & Revenue Closing capacities.
3. Deciding on the Size and Structure of Your Sales Team
When it comes to deciding the size and structure of your sales team, there's no one-size-fits-all approach. The right mix of SDRs and AEs depends heavily on your product, ICP, available resources, and growth goals.
Despite historical approaches to SDR:AE relationships running on a ratio basis, the reality is that this is a pretty simplistic way to approach it. The number of SDR's that you need to support your AEs depends on the volume of marketing inbound, the expectations around AE self generation and the amount of opportunities that an SDR is capable of generating with your product in your target market.
The best approach to this is to plan the SDR team based on capacity instead.
4. Build an accurate model (or use software)
This is where the big headaches start - Building a spreadsheet model (or finding a free template online) can not only be a huge resource drain, but can be where the bad assumptions and inaccuracies come in.
Are you considering the time it takes to turn leads into deals when it comes to hiring decisions?
Do you have enough managers to effectively look after your teams?
Are the number of inbound reps suitable for the volume of inbound marketing leads?
A good starting place can be with a free spreadsheet - We're here to tell you that they're all crap, so we've built a better free template.
Alternatively, you can slash the time it takes to build a plan from months to just minutes, using dedicated sales capacity planning software, and you can even start for free.
None of the templates will allow you to deal with nuances like assigned AE SDR relationships, round-robin lead flows and differing KPIs between markets - Clevenue does and it also makes scenario planning and stress-testing a breeze 👇
5. Hiring the Right People: SDRs vs. AEs
Once you've decided on the size and structure of your sales team, the next step is to hire the right people. The perfect candidates for your sales team should possess excellent communication skills, a hunger for success, and resilience in the face of rejection.
When hiring SDRs, there's the decision between more junior SDRs that will need more training & hand-holding than experienced SDRs, however they come at a higher cost.
For AEs, on the other hand, there's considerations around industry knowledge, selling skills, and a proven track record, however the latter is a difficult area to verify, and more recently less representative of their ability and more of the level of support in their current organisation.
A lot of your consideration should centre around making them successful, and matching your hires to the level of support you can give them - The more enablement and coaching support the less experienced (and cheaper) you can afford to hire.
6. Training and Onboarding Your Sales Team
Once you've hired your team, it's time to onboard & train them. Comprehensive onboarding makes the difference between successful SDRs and AEs and a sales team that's present but not productive. Get it right teams are selling in weeks, not months. This includes familiarizing them with your product and sales methodologies and CRM, but going back to point 5 might even require teaching them what sales is and how to do it.
Bad onboarding can easily kill off the early benefits of growing a sales team, and can instead become a drain on resources. To help with it, we've created a guide on the best tools to help with Sales Team Onboarding.
7. Keeping Your Team Motivated
Sales can be a high-pressure job, so keeping your team motivated is crucial. Create a rewarding work environment by recognizing and celebrating small wins. Develop incentive programs that acknowledge not only the team's achievements but individual contributions as well.
A well thought out commission plan helps with motivation - We've built a free sales commission plan template covering both AE and SDR roles.
8. Measuring Sales Team Success & Progress to Plan
Finally, to ensure that your sales headcount plan is effectively contributing to your company's revenue growth, it's crucial to measure your team's success, and track your progress towards plan.
Key metrics for SDRs include the number of qualified leads generated, conversion rates from leads to opportunities, and the quality of leads passed on to AEs.
For AEs, metrics such as the number of deals closed, revenue generated, average deal size, and customer retention rates can provide valuable insights into their performance.
Overall, you should have a live view of your plan and the projected future attainment based on hiring, marketing spend and other factors such as promotions, attrition & market factors.
Ultimately this can be neigh-on impossible in a spreadsheet, so it makes sense to finally start moving this process out of spreadsheets.
Embracing Dedicated Sales Capacity Planning Software
Given the complexity of modern sales capacity planning, it's clear that traditional spreadsheet-based methods are no longer sufficient. As market dynamics shift, so do your sales KPIs, making it almost impossible to keep your plans up-to-date.
This is where dedicated sales capacity planning software, like Clevenue, comes into play. We're revolutionizing sales capacity planning by providing a platform that uses live data to ensure that your plans are always pointing in the right direction - towards your revenue target.
The best bit about Clevenue is that you can start at no cost - No strings attached.
FAQs
Q: What is the foundation of a successful sales organization?
A: The foundation of a successful sales organization lies in having the right team - a balance of Sales Development Representatives (SDRs) and Account Executives (AEs). This combination forms a well-oiled sales machine that drives company revenue growth.
Q: How do you ensure your sales team contributes to revenue growth as expected?
A: The answer lies in developing an effective sales headcount plan. This plan takes into account changing market dynamics, lead volumes, deal sizes, and more, using a data-driven approach to adapt to shifting conditions and meet revenue targets.
Q: What are the roles of SDRs and AEs in a sales organization?
A: Sales Development Representatives (SDRs) focus on prospecting, cold calling, and nurturing leads. They work closely with marketing to identify and qualify potential customers. Account Executives (AEs) concentrate on closing deals, understanding customer needs, negotiating contracts, and generating revenue.
Q: How do you understand revenue targets and capacities?
A: Understanding targets is crucial. Opportunity Generation Capacity relates to the volume of opportunities generated by marketing efforts, while Revenue Closing Capacity is the team's ability to handle the required volume of opportunities to meet targets.
Q: How can I decide on the size and structure of my sales team?
A: There is no one-size-fits-all approach. Factors like product, target market, resources, and growth goals influence the mix of SDRs and AEs. It's more effective to plan based on capacity rather than a simple ratio.
Q: What's the importance of accurate models or software in sales capacity planning?
A: Accurate planning requires considering factors like lead-to-deal conversion time, managerial support, and inbound lead volume. While spreadsheets are common, dedicated sales capacity planning software, like Clevenue, can offer more precise and efficient solutions.
Q: How should I go about hiring the right SDRs and AEs?
A: When hiring, consider the experience level, industry knowledge, and potential for success. Junior SDRs may require more training, while AEs need selling skills and a proven track record. Match hires to the level of support you can provide.
Q: What's the importance of training and onboarding for a sales team?
A: Comprehensive onboarding ensures productive SDRs and AEs. It includes familiarizing them with products, sales methodologies, and CRMs. Good onboarding leads to faster sales results.
Q: How can I keep my sales team motivated?
A: Recognize small wins and develop incentive programs that reward individual achievements. A well-structured commission plan can also boost motivation.
Q: What metrics should I use to measure sales team success?
A: For SDRs, metrics include leads generated, conversion rates, and lead quality. For AEs, metrics cover deals closed, revenue generated, deal size, and customer retention rates. Tracking and projecting future attainment are also important.
Q: Why is dedicated sales capacity planning software important?
A: Modern sales capacity planning is complex and dynamic. Traditional spreadsheet methods fall short. Dedicated software like Clevenue uses live data to keep your plans up-to-date and on track toward revenue goals.