When is the Right Time for Your SaaS Startup to Train its Sales People?

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Sales leaders consistently underinvest in sales team training and development. As SaaS startups scale, sales execution becomes the most tangible metric of a business’ success, and the one by which the business’ health is benchmarked. Not to mention how the head of sales is evaluated. When is the right time to invest in sales training? And how much should a business invest?

Let’s take a hypothetical SaaS company with five sales reps, each with a $750k quota. Four of the team members attain 70% of their quota each month. But one of the account executives sets the standard. She closes $900k, booking 120% of her quota. It’s quite common to see a distribution of account executive performance resembling this one. Training aims to narrow the gap by spreading best-practices across the team.

One study found a 12% improvement in prospect close rates after training. Let’s assume after training this team improves close rates by 10%, which translates directly into a 10% increase in bookings. Before the training, the team books $3.0M annualized (750k x 70% attainment x 4 reps + 900k), and after it books $3.3M annualized. A $300k increase.

At a 70% gross margin, the training generates an incremental $210k in gross profit. An economist might argue the business should be willing to spend $209k for the training - every marginal dollar is worth it! But in reality, it’s much more likely to be willing to spend a quarter or a fifth of the gains, about $40k-50k, to justify the return-on-investment after transaction costs, lost time spent selling, and other factors.

For sales teams with sizable numbers of account executives, good sales training can save the cost of hiring a new account executive. Imagine our hypothetical startup’s sales team grows to 20 people. On average, they attain 70% of their quotas for a total bookings run rate of $10.5M (750k x 70% x 20). A 10% improvement is a $1.05M addition to the bookings, which is just about 2x the bookings capacity of a current rep. At this scale, the economics of sales training are plain to see: less headcount required to attain the same bookings run rate.

Of course, there are many factors to consider when evaluating sales training. What will the true gains in productivity be? How frequently should we train our reps? Which training system should we use? What is the impact to lost productivity during the training? Each startup will have to decide their own strategy.

However, as books like Predictable Revenue written which explicates the sales productivity strategies of Salesforce, and the math above shows, the impacts in sales training can be very important contributors to more consistent efficient growth - a win-win for SaaS startups.

Published 2016-12-12 in Sales 

I'm a partner at Redpoint. I invest in Series A and B SaaS companies. I write daily, data-driven blog posts about key questions facing startups. I co-authored the book, Winning with Data. Join more than 18,000 others receiving these blog posts by email.

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