AEs, SDRs Paying the Price for SaaS Sales Declines

I came across this really interesting blog post discussing the state of B2B SaaS sales. On this blog, we’ve examined a number of scenarios where B2B SaaS companies are contemplating reductions in force to reduce their cash burn to survive this very tough business cycle.

Some of the data in the post come via a joint research initiative from The Bridge Group and Rev Ops Squared. That report is based on a survey in April of 161 SaaS sales professionals to understand COVID-19’s impact on B2B SaaS sales.

Missing Goals Left and Right

Just under 30% of respondents indicated that they would hit their FY20 sales objective. About 64% indicated they could hit their Q4 goals. A lot is riding on hitting ambitious Q4 2020 sales objectives. As the report points out, if Q4 numbers are missed there’s likely to be further RIFs in early Q1 2021. 

I sense as eagerness among the business professionals I speak to for things to start ramping up quickly. One Atlanta resident I spoke with said that traffic levels around the city returned to pre-COVID-19 levels this week. Traffic will certainly be one key barometer of just how quickly things are rebounding. 

In terms of overall confidence, those respondents who sell a sub-$1,000 annual contract value (ACV) product were the most concerned with achieving their quarterly sales objectives. This makes sense since their customers are primarily local and small businesses. At the other end of the spectrum, those selling between $100,000 and $250,000 ACV were the most optimistic. 

At the time of the survey, only 27% had actually reduced the number of AEs, though 40% were concerned that AE headcount would be reduced in the future. As a footnote, high flying B2B IoT player Samsara just announced a RIF of 18% while raising $400 million. Our guess is that many AE reduction plans are just now just working their way up to the board level for approval. 

Expectations, Not Quotas, Drop

Particularly interesting is that 67.5% of companies surveyed have not reduced sales quota even though 70% of SaaS companies forecast missing the original FY20 New ARR Plan. This smacks of talking out of both sides of the mouth. Most companies say they do not expect to meet their FY20 goals, but only 33% have lowered their AE quotas. Our guess is that those companies that don’t align these things may see an erosion of trust among their AEs. This will exact a cost once the job market picks up again. 

The blog post’s author, Matt Bertuzzi, indicates that there have been layoffs in 58% of the companies that sell SasS into what he describes as Massively Affected Industries (MAI). These include advertising, hospitality, HR & recruiting, live events, medical practices, real estate, travel, and so on.

The good news is that according to this research the pace of layoffs is slowing as seen in the chart below. 

Source: The Bridge Group

Even more encouraging is another chart he’s provided of new hiring posts for AE and SDR positions in Austin, Boston, Chicago, NYC, and San Francisco. These are certainly among the key hubs of B2B SaaS companies.

Source: The Bridge Group

 

There’s another silver lining in the data. At least there is for companies that are hiring. The supply of experienced and available SDR and AE will well exceed the near term demand. That means that companies can be both more choosy about whom they hire and less generous in overall compensation plans (that is a double ouch if you are one of among the job seekers). 

Our Takeaways

There will be more reduction in force as we roll through this period of uncertainty. Yet as the recovery gains momentum, many companies with solid business models and great products will begin rebuilding their sales ranks. And they’ll be doing so while getting considerably more value from those sales professionals. This will have the compounding effect of lowering CAC (customer acquisition costs). And we believe this will positively impact retention rates and help smart B2B SaaS companies deliver much better operating results in Q4 2020 and into FY 2021. 

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