B2B Sales: How to optimise your sales team structure

Welcome to the next instalment of our B2B series! In case you missed it, Part I on building out your top-of-the-funnel is linked here. We wrote this article in collaboration with our Operating Partners at Samaipata. It strives to be useful and actionable to early stage startup-founders, covering all the typical challenges. For our other articles, please find them here!

Picture this — you’ve had your head down for a while and finally, your product is showing early traction with your first few founder-led sales wins. You’ve read up on how to scale up your sales funnel (or if not, here it is!) and you’re now ready to build out your sales team. Sound familiar? Well, you’re in the right place today!

We are sharing Javier Llordén’s, our expert Operating Partner on B2B sales, wisdom on this topic. Javier has a wealth of experience in B2B sales, both running large sales teams and advising startups, SMEs and Corporates on his area of expertise. We are proud to call him a member of The Hive, Samaipata’s VC platform helping our founders succeed. Javier has been a critical contributor to efficiently scaling up the sales efforts of our portfolio companies.

First, it is important to note that we’re focusing on acquisition sales teams here (i.e. new sales) and not expansion sales teams (i.e. upsells or cross-sells) as that’s a whole different story! Additionally, we note that there is no one size fits all solution as every business is different, but we will aim to share a framework to help you think through it for your startup.

So, what is an ‘optimal’ sales team structure?

Typically, sales teams are split into various profiles including MRs (Market Research), SDRs (Sales Development Reps) and AEs (Account Executives). Just like in a factory production line, inputs go in and outputs come out. In a sales context, input would be how MR defines your target market and output would be customers.

In your sales ‘production line’, there are two stages — the prospection and lead qualification stage (led by SDRs) and the sales process itself (led by AEs). SDRs typically generate meetings for AEs who carry the lead through the sales process to conversion into customers.

Generally, you want your sales team to maximise output, or customers. There are 2 issues that startups typically face when aiming for this, and avoiding them requires careful balance.

• Overcrowding either the prospection or the sales stage, leading to bottlenecks and a less effective process e.g. SDRs generating too many meetings for AEs to handle.
• Excess capacity in either the prospection or the sales stage, leading to inefficiencies.

This careful balance of capacity is what defines your optimal sales team structure, it boils down to a question of how many SDRs and how many AEs do you need?

Alas, there is no magic number (we wish!) The answer will depend on the size of companies you’re targeting and complexity of the product or service you’re selling and hence, how important will outbound sales be.

Do you target smaller companies (e.g. < 50 employees)?

• Your sales cycle is typically short, ranging from days to 2 months between prospection and closing. Sales are low touch with minimal interactions with prospects before closing and only a handful of stakeholders involved.
• Your pool of prospects will be huge and the market you’re addressing is large. However, your contracts are also typically small so your sales team should focus on growing volume.
• This means you need to grow a high velocity sales team (short cycles, high volume) that focuses on inbound sales. Generally, outbound sales are not affordable since contract values are small and so payback for CAC would be too long.
• As a rule of thumb, contract values smaller than €1k shouldn’t focus on outbound at all.

Do you target mid-sized companies (e.g. 50–250 employees)?

• Your sales cycle is a little longer, ranging from 3–6 months between prospection and closing. Sales are mid touch with more interactions with prospects, although stakeholders are still limited to a handful.
• Your contracts will generally be larger although your market will still be large in terms of number of prospects.
• Thus, your sales will be a mix between inbound and outbound. Following the rule of thumb, if contracts are larger than €1k then you should think about setting up an outbound sales team.
• We note that outbound sales will tend to have lower conversion and higher CAC than inbound, so remember to take this into account!

Do you target larger companies (e.g. 250+ employees)?

• Your sales cycle is long, ranging from 6 to 12 months or more and often requiring length proof of concepts or trials. Sales are high touch with many interactions with many stakeholders across the company.
• Your contracts will be large but you will have a limited number of prospects in the market. Your sales team should treat every prospect like the only opportunity as there aren’t many out there!
• Your sales will be almost entirely outbound and may also involve Account Based Marketing (ABM), when marketing and sales work together to close the sale.
• We note that even though you’re not targeting larger companies specifically, the more complex the product or service you sell, the more your sales team would behave like they’re targeting larger companies i.e. lean more towards outbound.

Got it! Now, how do I calculate my optimal sales team?

Easy — work backwards from a given sales target! Here are the steps and a worked example below.

1. Determine your sales target for a given period (e.g. a month)

2. Calculate the € value of new opportunities needed to achieve this

First, note your average sales cycle length. This will tell you when you need to create new opportunities that will close at the month you are analysing.

Then solve for it by dividing your target by the conversion rate from new open opportunity to close. This will tell you the € amount of new opportunities you need in the starting month (defined above using your average sales cycle length).

If you don’t have any previous numbers to go off, use an assumption and tweak it as you go throughout the year.

3. Calculate the number of AEs you need

To do this, divide the required € value pipeline of new opportunities by the average opportunity size to calculate the number of new opportunities required. Then, divide by the number of new opportunities an AE can handle at a time (noting that the AE is also handling opportunities from previous months in the pipeline). Feel free to use your experience here or make an assumption. Again, this should be adjusted to be more accurate throughout the year.

If you’re planning for hiring, we note that you should also account for a ramp up period for AEs (and SDRs), which can be as long as 6 months for complex products and services (SDRs up to 3 months)

4. Calculate the number of SDRs you need

To do this, divide the required € value pipeline of new opportunities by the average opportunity size to calculate the number of new opportunities required (as above in AE). Then, you can use the following benchmark (this is an outbound benchmark) on how many meetings an SDRs can set up (depending on target company size) to solve for the number of SDRs you need:

• For mid or tier 2 sized companies: 15–25 meetings per month → Total pipeline size of 40–60 companies per SDR
• For large or tier 1 sized companies: 10–15 meetings per month → Total pipeline size of 15–20 companies per SDR

We note that conversion rates from lead to meeting vary depending on inbound or outbound so you should account for this.

There you have it! Your optimal sales team structure. Is that all though? Absolutely not! Don’t forget what comes afterward — the onboarding process after the AE closes a sale is critical and should be performed by a separate Customer Success team rather than the sales team, as the skill set and audience is very different. The optimal size of a Customer Success team will (again!) depend on the length of your onboarding process, how automated it is and the number of touch points required to transform the new customer into a happy user!

Wait, a couple more things…

As your business grows, how do you keep growing your sales team while keeping it ‘optimal’? At this point, you may want to consider splitting your sales team into small groups called Pods or Squads, each with their own MRs (this position can be shared), SDRs and AEs. These squads are typically split so that they can specialise on particular market segments, such as different sized customers, different industries or geography,

Once such a squad hits the optimal structure (remember, the balance we mentioned before), keep it that way! You should scale your business by adding more squads rather than adding more members to existing (optimal) ones so that they may continue in balance and each one remains manageable and less complex.

Our last lesson from Javier today is to watch out for unwanted turnover, especially with AEs as when they leave, the sales they were responsible for go down to zero and you can easily spend ~6 months to hire and ramp up. All this means that you will be short 6 months sales per AE leaving the company so remember to account for it when planning ahead. Good tip, thanks Javier!

At Samaipata we strive to partner with early-stage founders and to support them in taking their business to the next level. B2B sales is only one of many fronts in which founders can receive valuable support from The Hive, our network of Operating Partners. Check out more ways in which we can help in previous articles.

And as always, if you’re a European platform founder looking for Seed funding, please send us your deck here or subscribe to our Monthly Founders Kit here!

Samaipata is an early stage founders’ fund investing in digital platforms with network effects across Europe.