Most early stage startups put together financial plans with booking targets that are aspirational. Worse, they are not actually linked to the underlying sales capacity you have on hand or plan to hire. Do NOT do this.
I highly recommend building a sales capacity plan for your business that will allow you, at least in a spreadsheet model, to understand what your potential ACV bookings could be over the next three years based on your planned AE hiring & capacity.
I often find that startup CEO’s are not intentional in regards to this planning which, in my view, is a major no-no.
I have been involved with many SAAS companies over the last 15 years and the biggest determinant of their enterprise value is one and only thing: their ability to add productive sales capacity vis a vis other companies.
In fact, other than ensuring you do not have low net retention and, as such, an impossibly leaky revenue bucket, there is nothing more important for a company’s entire executive team to focus on than its ability to add AE’s and make them successful. This is what I mean when I tell exec teams and all function heads (especially in product and marketing) that, in the end, they all work for sales. That is not a bad thing — embrace that reality. And if you are product led, then - okay, everyone works for product and sales :)
In addition to putting together an intentional sales capacity model (which answers the question as to what could I expect to book with X number of AE’s on board), it’s similarly crucial to understand, based on your business metrics, how much qualified pipeline must be created each quarter to ensure your spreadsheet model moves from fantasy world to reality.
This allows you to avoid the drama 50% of series B & C companies face when they hire a bunch of reps because they kinda fibbed to their new investors that they had product-market fit, went and hired said number of reps, realize oh sh$%$ six months later that no one is hitting their numbers, run out of parlor tricks like changing the kombucha flavors weekly to distract the sad people on the sales floor, and then decide prematurely to fire their sales leader to find someone “that has scaled a company before”. Been there, done that. No fun.
If I have excited you enough to want to download my template and get cracking on your own version of a plan, let me motivate you even further.
Imagine if you will, at your next board meeting, you can answer all the following questions quickly and deftly that “super-clever” investors love to throw at you:
- “How many AE’s do you have on board? How many of them are ramped?”
- “What is your sales quota capacity currently? How about at the beginning of next year?”
- “What is your actual ACV performance as a percentage of your assigned street quota?”
- “For your financial plan, what is the over assign between that and assigned AE quota?”
- “How much pipeline do you need to create this quarter to ensure you hit your future targets?”
- “Which pipeline creation engine most under-performed for the enterprise segment?”
And so on. Make this model yours and you too will be soon on your way to becoming Mr. or Mrs. Wizard at your board meetings. More importantly, it will allow you to really understand the sense of scale (i.e in terms of # of AE’s and amount of required pipeline) associated with your growth goals.
Without further adieu, download this template and follow the instructions provided by yours truly on the tab called “Instructions”.
Special thanks to Daniel Wegzyn for partnering with me on this model. Remember — when you have all your inputs entered, be intentional on the difference between your financial plan of ACV performance and the fully assigned street quota. Buy yourself time and be more conservative - the younger you are and the less clear your product market fit it — i.e. I am perfectly fine with you setting your revenue and expense plans to 70% of Quota as your target. If you achieve much less than that, something is off and it's time to revisit other fuel topics.
