When To Hire: Your First Account Executive & Account Manager
We get one question a lot from early stage B2B entrepreneurs — when should I hire my first dedicated teammate in sales and customer success?
In the early days, founders should, and typically will, do everything. This includes sales and support. There is no better way to learn your product market fit than hearing directly from customers, whether prospects or existing. Customers tend to be pretty unfiltered when it comes to feedback, and it’s invaluable for a founder to be on the frontlines of hearing it straight (rather than having it selectively filtered as it goes up the chain). Also, importantly, we’ve seen it can help founder credibility with later stage employees if the founder has real empathy from having worked in every role in the early days — it shows that there’s no role too small for the CEO.
Eventually, though, complexity scales beyond a founder being able to wear every hat. Specialization is required across the board, and sales and customer success are no exception. This is the point at which the business is scaling to such an extent that the CEO starts to feel “burn-out” from having too many balls in the air, and quality begins to suffer. This is the absolutely crucial point in an early business’ life where the CEO needs to pick their head up and transition from being everyday in the trenches to hiring folks who can become the experts.
While every company is different (and it’s dependent on relative ACV and deal velocity), we typically find that companies that are roughly 3 to 6 months ahead of achieving $1M in ARR should begin to hire for their first sales and account management teams.
This “line in the sand” is historically where Series A VC funds have defined their hunting ground (although this line has moved north in recent years). There’s some justification to this otherwise random number — through years of watching companies grow, $1M of ARR is when a company has sort of proven early product market fit and that things are, more or less, “working.” It’s now time to institutionalize what’s worked and make it more repeatable.
Often you will see companies hire a business or sales development rep (BDR or SDR) earlier than $1M ARR, which makes sense — these typically more junior employees are responsible for drumming up leads that the founder can run with. However, above $1M of ARR, the company begins to need an account executive (AE), or someone who is full-time dedicated to running leads and managing sales pipeline.
Also, it’s important at this stage to create accountability in the sales department. AEs are compensated with a significant portion of their salary tied up in commission — if a sales person doesn’t perform, they don’t get paid. This creates alignment around quarterly bookings goals and makes it much easier to benchmark performance. If it’s just the CEO running sales, it’s much easier to make excuses for a bad quarter — by bringing on your first AE, you are now establishing a standard to which you can hold your company’s record.
Thus far I’ve mostly talked about the sales side, which we’ve seen to be less controversial in terms of hiring priority. The flipside of the sales coin is account managers (AMs), who are your “farmers” that you need to manage your customers and make sure they’re happy (plus, hopefully, upselling).
Companies almost always hire AMs too late and only after they see that churn from their earlier cohorts is higher than they’d like. This ends up being reactive hiring that fails to prevent predictable churn. At $1M ARR, you need someone consistently calling on customers and monitoring their usage of your product; if not, you will miss early warning signs to jump in and help customers get productive so they stick around (and become brand advocates). As a result, we recommend companies think about AMs at the same time they think about their first AEs, and bring them on in tandem to create partnership between these roles off the bat.
Don’t forget that for both AEs and AMs, there is a considerable “ramp” period, or months during which the employee is learning about your company and product before becoming effective at selling and supporting. Depending on the complexity of your product, ramp can take anywhere from a month to a year, and you can’t really assume a ton of productivity in the interim. This ramp period is why we advocate that companies start to look for their first AEs and AMs prior to hitting $1M of ARR. Not only will it take longer than you think to find the right person, but you need to get them trained so that they are hitting maximum effectiveness at the same time that the business is starting to fire on all cylinders.
By the way, hiring your first AE and AM doesn’t mean that the founder gets to pack their bags and head to the beach. We almost always see founders remain involved in both sales and support for high profile customers. Founders become pinch hitters who step in to get big deals across the line (or to keep those customers around come renewal time). While it becomes a much smaller part of a founder’s day, it’s important for a founder to stay involved in major sales to add credibility and to make customers feel special that they are getting extra love and attention.
Adding additional employees to a scrappy organization is scary — we totally get it. But we’ve seen too many companies realize too late that they’re understaffed, and lose out on profitable growth while they play catch-up. It’s important to always be thinking a couple quarters ahead, and sales and account management are no exception.
