At Attivo, we see a detailed sales hiring plan as an essential element of a financial model. When thoughtfully developed, a sales hiring plan drives top-line revenue goals for a company. Moreover, leadership teams can leverage it to validate assumptions around go-to-market strategy and drive alignment across teams.
A sales hiring plan also helps leadership plan correctly for ramp time, quota build, and assembling the correct ratio of sales and support team members. Your detailed sales hiring plan is a critical piece of the financial model that investors often spend extensive time reviewing. When Attivo works with an early-stage startup to build a financial model, we build a sales hiring plan that includes defining required roles, budgeting for compensation and recruitment, and setting metrics for success.
If our revenue objectives require onboarding a certain number of customers, we can work backward from those goals to identify the necessary sales capacity and timing of hires. In addition, we have built assumptions around what our current sales team can deliver, in terms of customers and revenue. Based on our current sales team, we can determine the hires needed to achieve our revenue goals. Continually revisiting and updating our assumptions with actual performance data ensures our sales hiring model stays aligned with realistic, attainable revenue targets.
Components of a Sales Hiring Plan
Ramp Time
The period between a salesperson’s start date and their ability to reach 100% of a set sales quota is what is called ramp time, and we make sure that ramp time is accounted for in our financial planning. We can use historical assumptions to help generate what a reasonable ramp time might be. Depending on the product pricing, the industry, the customer type, and the company, a reasonable ramp time could be anywhere from 3 to 12 months.
Generally, it is not realistic for a salesperson to have the ability to realize 100% of their sales quota immediately after their start date. It is critical that we understand ramp time to compensate the team appropriately. To effectively incentivize and compensate sales reps, we might pay sales reps a nonrecoverable draw during that period and/or structure the commission rate such that On-Target Earnings (OTE) is achievable during this period.
Quota Build
The second component of a sales hiring plan is determining the actual sales quotas the sales team must achieve. The quotas we set for our sales teams should be realistic and achievable. This can be especially difficult for new companies and new teams as they determine what they can achieve in their first year versus years two, three, and beyond.
For example, imagine an enterprise company that expects Account Executives (AE) to book $2 million per year. The first-year quota may only be $1 million due to the time needed for a sales rep to build a customer pipeline and a lack of market awareness for the new company. The second-year quota might be $1.5 million, which accounts for the AE building their customer pipeline and growing market presence. Then, for the third-year quota, the AE should achieve $2 million because they will have built out a robust customer pipeline as supported by a fully developed marketing plan, enabling the full quota to be realistic and achievable.
Achievement levels are vital for sales compensation plans, clearly defining how performance translates into pay and motivating sales reps to hit and exceed their targets. By setting clear threshold targets and accelerators, businesses can align sales efforts with strategic goals while effectively managing compensation costs and attracting top talent.
The quota that we assign to the sales team is generally higher than the revenue plan to provide an opportunity to meet the overall revenue target. This means our quota and booking targets will differ. Even though the quota is $5 million, the bookings target we lay out for the company is $4 million because there’s an 80% achievement level that we place on that quota. The salespeople will get paid based on achieving $5 million, but the company will build its business based on achieving $4 million.
Sales Team Ratios
The last key factor we need to consider as we build our sales team is the ratio and composition of roles on the sales team. What is the headcount necessary throughout the organization to support the revenue plan? After we understand the revenue plan, “the ratios” provide the inputs for determining how the sales function needs to scale from lead generation through customer success and customer support.
These ratios provide the basis for determining headcount for sales managers, customer onboarding, customer support, customer success, sales development representatives (SDR), business development representatives (BDR), etc. If we have a group of SDRs or BDRs, what’s the relationship between the number of SDR/BDRs and the number of salespeople? Is it two salespeople for one SDR/BDR? Is it three salespeople to one SDR/BDR? Based on that ratio, we have to look at the unit economics of the costs to bring in a deal.
If we only consider the cost of a salesperson, we are not considering the full costs of acquiring new customers. The cost of sales operations, new rep onboarding, lead acquisition, and new customer onboarding must all be considered. This framework helps leadership teams in their decision-making as they look to scale efficiently, strengthen retention, and ultimately, achieve key goals.
The Vision Strategy Execution Framework In Sales Hiring
The Vision, Strategy, Execution (VSE) Framework is a tool Attivo’s FP&A team has developed to deliver actionable, well-reasoned financial plans that support founder vision, provide metrics to measure achievement, and create team alignment across a client’s business. This framework is particularly useful in checking our approach to sales hiring planning.
Vision In Sales Hiring
Defining vision in a sales hiring plan starts with clarity around revenue goals and initial hiring needs. We need to identify precisely what the company aims to achieve (i.e., hitting specific ARR targets within set timelines) and align these objectives with investor expectations. It’s crucial at this stage to factor in the founding team’s skillset: technical founders may need early hires focused on sales and marketing, while business-savvy founders might require more operational or technical roles. Understanding the founding team’s skill sets helps us plan and ensure that initial hires strategically complement the existing team and maximize the impact of these early decisions.
Strategy In Sales Hiring
Strategy involves selecting the right sales motion and business model to effectively achieve set revenue targets. We need to assess whether growth will be driven by enterprise sales or marketing-driven approaches. Clearly defining our customer acquisition model, whether sales-focused, marketing-focused (product-led growth), or balanced, will inform the composition of the sales team, quotas, and ramp-up periods. This strategic clarity ensures resources are deployed efficiently, aligning our sales capabilities with our target customers and chosen market approach.
Execution In Sales Hiring
Execution translates vision and strategy into a concrete, actionable hiring plan. This involves determining exactly when and how many salespeople to hire, based on ramp-up timelines and realistic quota expectations. From here, we can test and update our assumptions to validate and fine-tune our approach as needed. Once this feedback loop is established, our sales function is primed to scale.
Ready to Level Up Your Decision-Making?
Attivo’s FP&A team works alongside founders by providing valuable data and strategic insights to aid their decision-making. By working with a team of experienced FP&A professionals, founders can make informed choices, allocate resources wisely, and guide the growth of their business. Our FP&A team can support fundraising, build annual plans, establish key metrics, provide budget vs actual reporting, perform deep dive financial analysis, and provide other services that help founders scale their business.
Don’t let guesswork guide your growth—partner with Attivo to develop a robust financial model tailored to your startup’s needs. Contact us now and begin your journey to more innovative, effective decision-making that will transform your strategic vision into actionable insights for success.
