Hiring Plan Template for SaaS Startups
In the SaaS industry, the name of the game is often efficiency. SaaS companies seek to deploy their resources as efficiently as possible to create businesses that scale over time. One way to measure efficient growth is by comparing employee headcount to overall ARR.
This can be a helpful proxy to use when creating hiring plans to understand how many employees and at what salary levels your company can support based on ARR growth. This will vary depending on your company’s fundraising, stage, and growth strategy. In this case, a model is an effective tool to plug in customized inputs so that you can visualize what a hiring plan may look like for your business.
Create a Strategic Hiring Plan, Using ARR per Employee Target Benchmarks
With this model, we are seeking to determine the number of potential new hires to place over time while maintaining certain efficiency thresholds.
This is important to analyze so that teams can drive alignment on hiring plans and create a hiring strategy that matches their growth goals. Hiring too many employees too early can lead to a bloated expense base that may lead to layoffs if growth doesn’t catch up. Hiring too late can mean missing out on opportunities to capitalize on growth in the market.
The result of this model can be used to inform hiring timelines and staffing models. Based on the needs per department and how long it takes to source and place each hire, a hiring plan can be formulated to maintain efficient growth. To learn more about staffing your recruiting team to meet your hiring timeline, check out our recruiting capacity template.
Template Inputs & Forms
Projected Monthly Growth Rate
The growth in monthly recurring revenue you’re expecting. (A more advanced model may apply a growth curve instead of flat growth)
ARR per Employee Target
The efficiency benchmark you wish to target for ARR generated per employee. This will serve as a threshold for determining when new hires can be placed.
Salary to ARR Target
The efficiency benchmark you wish to target for determining appropriate salary levels as it relates to ARR. This will also serve as a threshold for determining when new hires can be placed and how much your total salary spend can be.
- Most ARR/employee models do not factor this in, so feel free to leave this input out. Our reason for including it is because headcount often doesn’t tell the full story. If you have two companies that each have $5M in ARR and 50 employees, but one company is paying a total salary of $8M and the other is paying a total salary of $4M, are they both using their resources with the same degree of efficiency? We’d argue that they’re not. Also, by including this input in your model, it helps to serve as a guide for your hiring plan on not only how many employees you can hire, but also how much you can spend on salaries to do so.
- It’s also worth noting that a more advanced model may factor in a markup for benefits and employee perks expenses.
Employee Turnover Rate
For simplicity sake, we do not have this factored into this model, but rather we have it included in our hiring timeline model. Consider adding to this model if you wish to factor in the turnover of employees over time.
Data Sources
Historical ARR by Month
To input your current ARR, you’ll need to source data from your company’s financials. This can be a single static number or you can include the dataset in the model and calculate the ARR from that data. Our recommendation is to always include the dataset, but for sensitive data, there may be good reasons to leave it out.
Current Employees and Salaries
To input your current employee count and total salary spend, you’ll need to source data from your company’s HR systems. Similar to ARR, these can be static figures or calculated from an attached dataset, based on privacy concerns.
These are the only two datasets you need to properly set up the model. However, it is often helpful to use external datasets as a guide for setting the target benchmarks. If you need a few references to help determine where to set your target ARR/employee and salary:ARR, these resources may be helpful:
Setup and Methodology
Columns: Monthly time series, starting with the current month, projected for 12 periods.
Rows: For each month in the time series, calculate the following:
- ARR: Start with the current month’s ARR (from data) and apply a monthly growth rate (input) to project ARR over the time series.
- Total Employees: Start with the current month’s employee count (from data) and add in the new hires placed each month as determined by the model.
- Total Salary: Start with the current month’s salary spend (from data) and add in the additional salary each month as determined by the model.
- ARR/employee: Divide ARR by the total employee count.
- Salary:ARR: Divide the total salary spend by ARR.
- New Employees Hired: Use a series of IF statements to determine if new employees can be hired based on meeting the criteria for the set target benchmarks.
Logic for New Employees Hired:
- If ARR/employee is less than the target benchmark, then no new employees can be hired.
- If salary:ARR is greater than the target benchmark, then no new employees can be hired.
- If both of these are false, then determine the max number of employees that can be hired, by still satisfying the target benchmarks.
Output
By creating this model, you should arrive at a total number of new employees that you can hire each month while meeting the target criteria. To communicate a compelling data story to your HR leaders, board of directors, or other stakeholders, consider using the following visualizations and key metrics.
Visualizations to Consider:
- Use a combo chart to plot ARR/employee over time against the set target benchmark
- Use a combo chart to plot salary:ARR over time against the set target benchmark
- Use a bar chart to plot total employees and new employees hired over time
- Use a bar chart to plot total salary spend and new employee salary spend over time
Key Metrics to Consider:
- Total number of new employees able to hire each month
- Total salary spend on new employees able to hire each month
Conclusion
Determining when to grow your team and at what rate is always a complex decision. Modeling hiring growth through the lens of SaaS efficiency metrics can be a helpful tool to structure your thoughts and inform decision making.
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Originally published on the Superchart site.
