There’s an exercise I’ve been through with many founders that are just getting to Initial Traction, say $1m in ARR or so, sometimes less, where I map out their future hiring.
They are often a bit shocked at how many people they are going to need to hire. Because SaaS requires so many functions beyond engineering, especially if it’s sales-driven … outbound, SDRs, inbound, field sales, marketing, customer success, support, more complex product management, etc.
Roughly speaking, most founders will need to hire about twice as many people as they’d planned.
So let’s break it down. Let’s say you are at $10m ARR and decently funded, you’ll probably have 100 headcount by this point, or at least, by $15m ARR. What will it look like, if it’s a sales-driven model?
Let’s say its growing at say 100% annually and you wants to hit say $20m ARR the next year.
So on the Sales side we’ll need about 40 headcount at $10m ARR (to grow 100% the following year):
In Customer Success, we’ll probably need about 20 headcount:
In Marketing, it can vary based on outside vendors, but I’m guessing 4-8 employees:
In Support, we want 24×7 support at this point, including phone support. Let’s assume that takes 5 headcount, minimum, ideally 6.
>> OK we’re up to ~70 without a single engineer!
Now let’s cross over into product and engineering:
In Product, we’re going to need at least 4 FTEs, and even that isn’t much fat:
In DevOps/TechOps, we’re going to want probably 3-4 folks just to ensure 24×7 coverage. Really, 4 would be a lot better than 3. PagerDuty is tiring. Should we count DBAs etc. in here? Maybe it’s really 6-7.
In Engineering, I think rough-and-tough we’ll want 20 folks. That’s two “pizza box” teams plus a few engineers to do crazy / next gen stuff and a few to just focus on refactors, back-end, etc. We’ll want 2 designers that can work with front-end team by this point.
And finally, we need QA, probably at least 8 QA engineers + 1 manager. You can use RainforestQA or something else to get the headcount down, but otherwise, best case assume 1:2 coverage. So with 20 engineers writing code, we’re gonna need 8 folks on QA team minimum once things are humming, plus a boss for the team.
So that’s about 40 in product and engineering you’re gonna want at $10m ARR or so.
Or 110 altogether. Plus whomever you need in G&A, finance, etc.
I went over 100 a bit, I know, so cut back from there proportionately. But you’ll need those extra heads to hit your growth plan.
Note that I have a lot more in sales+marketing+customer success that your typical model looks like if you compare to public comps (~30% in sales and marketing by revenue). But that’s often because they are growing more slowly at that point on a percentage basis than you, have larger quotas, and/or aren’t investing as aggressively in customer success.
In other words, assume the majority of your headcount at $10m ARR is not building product, but helping to sell and market and support it.
See also this great post from InsightSquared on their ratios and headcount, as well as Hubspot’s. Hubspot is a bit more SMB-y than the model above, and is at $100m+ ARR … but both are good comps.
100 employee image from here