How Much Can You Afford to Pay Your Salespeople?
Pax Momentum wants to help you answer a key question: how much can you afford to pay your salespeople?
At PAX we’re all about helping startups who’ve established some product/market fit and early traction scale up their go-to-market efforts. One key milestone is when the founder is no longer involved in every deal, which means finding, hiring, and training a sales team. However, first you need to figure out what kind of sales team makes sense for your business model.
In this video, we’ll walk you through a model for financing your sales team that takes into account your unit economics, market rates for different types of sales professionals (SBRs, Inside Sales, Account Executives, and VP/Management level) and realistic performance expectations for the various types of contributors. This model will help you figure out if the projected cost of building a sales team makes sense with your overall strategy.
You need to have a general understanding of SAAS metrics in order to understand the model. This SaaS metrics breakdown from Updata Partners offers a good overview.
- tCAC: Total Customer Acquisition Cost. Includes marketing, lead gen, trade shows, sales expenses and onboarding.
- sCAC: Sales Customer Acquisition Cost. Includes all the expenses of sales rep (Account Exec, Inside Sales, etc.), PLUS the cost of management of the sales rep.
- mCAC: Marketing CAC. For our model, the mCAC is all the Customer Acquisition cost not included in the sCAC.
- PSR (PAX Sales Ratio): This handy ratio compares the sCAC and new Monthly Recurring Revenue (MRR) the sales rep lands. The Formula is: PSR = sCAC / MRR