When should I hire <role> at my SaaS startup?

Each decision for when to add employees at SaaS startups can be perilous. Hire too early or in the wrong roles and you unnecessarily increase your burn rate, which can lead to a quick death. Hire too late and you risk either starving, as a result of not having enough customer acquisition firepower, or drowning, as a result of not having enough staff to adequately support your growing demand.

When should I hire software developers?

If you look at the ratio of engineers to the count of all employees, it starts high and gradually declines over time. At the very beginning, depending on the technical skills of founders, one or more software developers are needed to develop a minimum viable product (MVP).

Once product-market fit has been validated, the next stage is to build a minimum lovable product (MLP). If bootstrapped and not yet scaling rapidly, you can typically accomplish this with the same dev team as built the MVP. If venture-backed, you will be expected to expand the engineering staff with each round of funding, especially early rounds, in order to scale more rapidly.

After establishing the MLP, further expansions of the engineering staff should be aimed at specific revenue growth opportunities, such as premium features, an enterprise version of the product, or new related products. If your exit strategy is acquisition, a talented engineering staff, especially if specialized in high-demand areas of computer science, tends to increase the valuation.

When should I hire product managers?

In many SaaS startups, the founders act as the initial product managers, setting the product vision, strategy and roadmap. Provided that there is good progress toward a product-market fit, founders can continue in this role until any of the following occur:

Once any of those events occur, your first product manager is needed. Additional product managers, UX designers and other product team roles should be added as the engineering team grows. The ratio of engineers to product managers is higher in early stage startups and decreases over time, reflecting the increasing product staff required to successfully coordinate with larger sales, marketing, and customer success teams

When should I hire marketing roles?

In the early phases, if your target customers are small-to-mid size organizations or your average annual contract value (ACV) is under $25,000, marketing should be one of your very first hires. In that situation, marketing should be hired before sales, because it’s more important to develop a reliable engine for bringing in quality leads than to get a few deals that are difficult and costly to replicate. For low ACV products, you should ideally be able to convert the leads to paying customers without the need for a salesperson, using a product-led growth approach, and if you do need a salesperson for some deals, founders often pinch hit in that role.

For products with higher ACVs, you should hire sales before marketing, because closing a few deals will make a big difference and that should be possible with cold outreach.

Your first marketing hire, to mix apparel-oriented metaphors, will need to wear many hats and roll up their sleeves, so regardless of whether you hire an individual contributor or a leader, they will need to have experience in all different facets of marketing, be self-motivated and have a solid plan.

As your startup scales, the marketing team typically grows in a steady proportion to the overall headcount of the organization (as opposed to being proportional to another team). Marketing teams tend to be inversely correlated to both your ACV and size of target companies; larger marketing teams are needed when you are acquiring higher volumes of customers at lower contract sizes.

When should I hire sales reps?

For early startups, this is the opposite story of marketing. If your target customers are large enterprises and your product has an annual contract value (ACV) of $50,000 or more, you’ll want to hire 1-2 hungry sales representatives before hiring in marketing. Those sales reps should be able to make progress through cold outreach and hustle prior to the need to hire marketing.

Be careful about expanding the sales team before you’ve found product-market fit. If you don’t have a clear, simple message that resonates with your target buyers and a product that provides more value than it costs, your new sales hires are going to struggle.

Once you have found product-market fit and your initial sales hire is seeing success, it’s time to start expanding. The size of the sales team should be proportional to the trend of marketing qualified leads (MQLs). Ensure that you have enough leads to keep the sales team fed.

For products with lower ACVs, you can hold off on hiring sales reps until they’re needed to close your occasional bigger deals. Some very successful SaaS businesses have grown to huge annual recurring revenue (ARR) with zero salespeople; they convert leads to paying customers exclusively through digital marketing, growth hacking, and try-before-you-buy strategies.

When should I hire customer success managers (CSMs)?

Customer success is typically the last role of these 5 that is hired for early stage startups, simply because you’re going to need a product and paying customers before you have the need for someone to support them.

For SaaS startups with a lower ACV, the customer success team should focus more on enabling customers to self-sufficiently address their own questions with stellar help documentation, self-paced training, and online communities. These elements are important for products with higher ACVs, but enterprise customers will expect a named CSM that they can contact directly.

The customer success team should be expanded at a rate proportional to your paying customers, particularly customers who have higher ACVs or the potential to grow significantly.

Tailored guidance

If you’re looking for more specific direction for growing your SaaS business, try out Map My Startup, which offers benchmarking against similar startups and root cause analysis for the factors that are holding you back from scaling faster.

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