2024 SaaS Account Executive Benchmarks - The Bridge Group Report

This episode provides a comprehensive analysis of the 2024 SaaS sales benchmarks, focusing on how sales and marketing functions are adapting to changing market dynamics.

1. Marketing's contribution to the sales pipeline has significantly increased, reflecting its growing importance in SaaS sales strategies.
2. There is a notable shift in the management of renewals and upsells, with account managers playing a larger role.
3. The compensation structure for sales roles is evolving, with on-target earnings seeing a notable increase, potentially impacting the customer acquisition cost.
4. The role of SDRs is becoming more critical, especially in outbound efforts, although their long-term effectiveness is questioned.
5. Companies are reassessing their sales strategies to improve efficiency and adapt to market changes.

1: Introduction to Benchmarks

Ray and Dave introduce the topic and discuss the relevance of the Bridge Group's report. Ray Rike: "This report is a key tool I've used since 2007."

2: Marketing's Growing Impact

Discussion on how marketing's role in generating qualified pipeline has increased. Dave Kellogg: "I'm surprised by how low it was, considering the capabilities of inbound marketing."

3: Renewals and Account Management

Exploring changes in renewal management, highlighting the rising importance of account managers. Ray Rike: "Account management is really rising in popularity for managing renewals."

4: Compensation Trends

They delve into changes in compensation for sales roles, noting a significant increase in on-target earnings. Dave Kellogg: "The rise in compensation is not necessarily good for the customer acquisition cost ratio."

5: Concluding Thoughts

The episode wraps up with predictions and advice for adapting sales strategies. Dave Kellogg: "Companies need to rethink how sales roles are structured to stay competitive."

1. Emphasize Marketing's Role: Increase investment in marketing to boost its contribution to the sales pipeline.
2. Rethink Renewal Management: Consider shifting renewal responsibilities to dedicated account managers to streamline processes.
3. Adjust Compensation Strategically: Align compensation with long-term sales productivity rather than short-term gains.
4. Evaluate Sales Role Structure: Reassess the division of roles among AEs, SDRs, and account managers to optimize sales functions.
5. Monitor and Adapt Sales Strategies: Stay agile and be ready to adapt sales strategies based on evolving market trends and benchmark data.

SaaS Account Executive Benchmarks including On-Target Earnings, Commission Rates, Quota, Quota Achievement, Renewal and Expansion Responsibilities are a few of the benchmarks that Dave "CAC" Kellogg and Ray "Growth" Rike discuss in this episode.

People

• Ray Rike
• Dave Kellogg

Companies

• The Bridge Group

Books

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Guest Name(s):

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Content Warnings:

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Dave Kellogg
Get SaaS talk with the metrics brothers, growth and CAC. And I'm growth, better known as Ray Reich, founder and CEO of Benchmarket. And I'm Kak, better known as Dave Kellogg, independent consultant, eir at Baldurton Capital and the author of Kell blog. And together we are the Metrics brothers. And we go together like c three.

Ray Reich
Po and R. Ah, I'm a big Star wars fan. Robotic space explorers who are loyal to their mission. But Dave, you have a much better language capability than I do, so you have to be c three po. Okay.

Dave Kellogg
Okay, well, I'm not sure about that, Ray, but even with our respective backgrounds in marketing and sales, we did find a common language. The language in the language of SAS metrics. I love that. With that as a foundation, let's move on to our topic of the day, and that's the 2024 SAS sales benchmarks report from the bridge group. But before we do that, Ray, let's hear a word from our presenting sponsor.

Ray Reich
Okay, Dave, this is a report that I've been using since 2007. So 2007. Now, interesting. They often have a two year space between the reports. So instead of doing it every year, they do it every couple of years.

So the last one they had done was at the beginning of 2022. So it really reflected more 2021 data. This one they did at the end of 2023. So it really does reflect 2023 data. Okay, well, cool.

Dave Kellogg
Ray, somehow I have never seen this report before. So one of the fun things about doing the podcast with you is that we find stuff that's just not in our regular flow. And I was really happy that you found this report because it's got a lot of great data in it. Why don't you first tell us a bit about the participants, Ray? So it was 172 executives, so not a huge end, but this has been pretty consistent over the last couple reports.

Ray Reich
For them, 87% are north american, which is kind of. The bridge group is more of a north american centric organization. Median annual revenues was 24 million and the median annual contract was about $47,000. But what was really nice about this, Dave, if you look at the distribution, whether it was by ARR or by ACV, almost every one of their segmentations had at least 15% of the population was in the $20 to $50 million range, or 5000, 200 million or five to 20. So great broad distribution.

Dave Kellogg
Awesome. So, Ray, I noticed that when you dove into the support, you zoomed right in immediately to marketing contribution to pipeline. Want to talk about that? I do. And because we both have different initial career journeys.

Ray Reich
Yours was more through a marketing and mine was more through sales. So I thought I had to make sure that the marketing contribution by ACV was the first one we did. So let me first of all start with the good news for those marketers out there, because the last two years have been hard, right? So marketing contribution to qualified pipeline for the entire population was 33% in 2022. Dave, that went up to 40% in 2024.

So almost up 20%. And before we dive into the segment differentiators, why do you think that was? Are you surprised that marketing actually increased their contribution over the last two years? Well, no, I'm actually surprised by how low it is, to be frank. I mean, I've worked with companies that get up to 95% of their pipeline from inbound and those are even enterprise companies.

Dave Kellogg
Certainly at small acvs you expect it to be high and I would expect it to be higher than 60% or so. I wouldn't say I'm surprised by the increase. I think we'll see on another chart, which I'm going to sneak in on you. It's coming from a shrink engine outbound, and I think outbound got a lot harder during that time period. So I'm not surprised to see that.

But I am surprised to see in general, you know, look, the general pattern they have is marketing falling as ACV rises. You know, average contract price rises. So 250k deals they're saying, hey, only third comes from marketing. But like, you know, for 25 to 50k deals, they're saying only half comes from marketing, which to me, frankly, was a surprise. Yeah, you know, maybe the marketing attribution software wasn't gamified enough yet.

Ray Reich
Dave. Could be. Ray, I'm going to sneak one in on you. I want to talk about Slide 13 now. So we were just talking about slide eleven for those following along in their handbook.

Dave Kellogg
But now we're on Slide 13 of this bridge group, Sasae benchmarks. And they're showing basically all because the first question I have is, where's the rest of it come from? Right, and this slide shows that. And it's showing, well, it's not showing the progression year over year, but it is saying basically that marketing is doing, you know, around half converging down to 35% for big deals, showing as acv rises that outbound increases. Which makes sense.

It shows AE's at roughly constant at around a quarter of the pipeline gets generated by AE's and it shows channels a little bit all over the place, but roughly 10%. So I think, I don't know, Ray, what do you make of this? Well, I think as the deals get much larger, to have more Ae self directed, that makes a lot of sense because, you know, it's like 23% in the lower end up to 30%. That makes a lot of sense. And then SDRs also went up dramatically on the outbound side from, you know, 11% in less than five K to 25%.

Ray Reich
So almost twice as much for large. This makes total sense to me, Dave, now we're not going to get into the whole discussion about what's the lifecycle of SDRs going forward, but I think SDR contribution over time could get lower and lower. So two things, one just for the audience, when Ray says goes up, he's talking about as a function of acv because we were also talking about over the last two years and Ray is basically saying, hey, it doesn't surprise him that outpatist doctor's generate 11% at less than five k deals, but 25% 100k plus. I'm with you on that. The part that I'm not with you with is on AE self generated pipeline.

Dave Kellogg
Look, the enterprise deals here, the 100k plus deals, AE is generating 30% of the pipeline themselves. That makes a ton of sense to me. AE's generating almost a quarter of their pipeline for less than five k deals. Makes like almost no sense to me. I don't know why inbound isn't bigger there.

Ray Reich
I don't know why either. And I don't, honestly, I don't know why we have sdrs in the less than five k. We should have full cycle AE's. But I think as we move more and more towards customer acquisition efficiency, Dave, that's going to change. It has to.

Dave Kellogg
I agree with you. I also agree with your prior assertion that sdrs, I think, look, there's an arms race with sdrs and soon everybody's going to have hyper personalized emails and outreach sequences driven by sdrs. And I think it's going to only reduce effectiveness, to be honest. I think the fast implementers will get a transient advantage, but I think once everybody has it, it's just going to actually hurt the productivity of the whole category. So I'm not a huge believer in outbound.

Call up my marketing bias, but we shall see. Ray, let's hit renewals. There's a chart here that talks about renewals responsibility. I found it super interesting. Let's hear from you first, though.

Ray Reich
Well, we've picked on sdrs and outbounds and now we're going to pick on customer success and csms. Let's talk about the renewals first. Account managers. Account management is really rising in popularity where in 2022 only 24% of companies reported that renewals were managed by an account management function. So not an AE and not a CSM.

That went up ten percentage points to 34% in 2024. And what went down the most customer success managers. Where 38% of companies were using csms for renewals in 2022, it's down 30% to 32% in 2024. And AE is pretty stable, down a little bit, 17% to 14%. But man, I can't believe that csms went down versus going up in the last two years.

Dave Kellogg
Dave yeah, I mean, there's been kind of industry wide pushback on customer success as we've talked about in prior. So it's a little bit led by Frank Slupman. And my short answer is, if you're not Frank Slupman and you're not running snowflake, maybe you shouldn't just automatically do what Frank Slupman did, because a lot of his wisdom works for enterprise companies. Big deals. The thing on this slide here, slide 14.

Ray look, this is basically saying that everybody has a three participant model where there's an account executive, an account manager and a CSM. And personally I like to have only two of those three wherever possible in my solution is to have salesy csms, and the salesy CSM does the renewal in rare cases with an assist from the AE. If there's like a bake off or a rebid or that sort of situation. So I actually don't like the trend line here because this data says a lot of people. And the thing I don't think they're showing here, maybe we'll see it later, is ratios.

I guess if you have one regional renewals rep, east west Central, I'm okay with it. But if they're staffing up that am function in large degree, now we've got three roles and personally I think it's kind of one too many. What do you think, Ray? The answer is yes. Unless you're a real scale, 100 million or more and you're doing a lot of upsells and cross sells, I think it's going to negatively impact your CAC efficiency metrics.

Ray Reich
But Dave, wait. Yeah, I mean, that's it, Ray. Right? Everyone's all excited about CAC, baby, period, and CAC ratios. And we're staffing three roles that arguably, if you listen to Frank Sleuthman, should be one.

Dave Kellogg
Just sales rep. And we said hey, let's specialize customer success versus sales, which I agree with. And now we said let's further specialize part of this raise the definition of am. I'm assuming it's kind of renewals rep. But sometimes it's also expansion rep as we'll see in a minute.

But I know it's very popular, but I'm not in love with this three player model. And I'm pretty sure you're going to say let's talk about who does expansion then relative roles in renewal. You want to talk about that? I do, but I'm going to derail for a minute. History often is the best predictor of the future, right?

Yeah. So in the predecessor to SAS, which was time sharing, we had two people that did four people's roles. Today we had an account executive who was responsible for selling, managing and maintaining renewals. And then we had a solution consultant who was responsible for doing the demos and then basically being the customer manager, project manager post close. So today we have four roles instead of two.

Ray Reich
I think we need to go back to two roles, I really do. And you're never allowed to say time sharing again. You have to say previous subscription models. We're going to people going to think you're 80 years old, Ray, and very well preserved. That's true.

Okay, well, let's go to expansion then. So let's start with customer success managers because they had less responsibility for renewals. Whoa, upsells. Two years ago, 19% of companies had csms at least being responsible for identifying and helping with upsells. That's down to 8%.

That's like a 60% decrease. At the same time for upsells, account managers went from 29% in 2022% to 42%. So those account managers are not just doing renewals, Dave, they're doing upsells. Now. I do think one of the things bridge didn't do here was define what an upsell is versus a cross sell.

So I'm assuming an upsell is just getting more users or more usage for the product. What do you think about upsells here? Yeah, I mean, my standard definition is upsell is either seats or additions. You go from gold to platinum. You go from ten seats to 20 seats.

Dave Kellogg
That's upsell cross sell to me is that you buy product one and then we sell you product two. So look, my takeaway on this slide, Ray, is basically customer success is a little bit in trouble here because it's only about a third of the time the renewals wrap and less than 10% of the time it's the expansion rep. So what it means is that the AM, the account managed, you could kind of call this slide the revenge of sales. Cause the AM is presumably work in sales and this represents sales kind of taking back responsibility for renewals and upsell and cross sell. And that's.

Look, I'm not necessarily opposed to that. It makes me sad for customer success because customer success appears to be turning into an advanced tech support function. That's what I look at this, I see technical support. Okay, a third of the time we'll do your renewal, but we're really not the primary people doing expansion of either flavor. And by the way, a third of the time the account manager is doing renewal.

So to me, customer success is kind of on notice that they seem to be kind of quietly being replaced by sales. Who's creating an AM role to do the selling part of the job, leaving behind essentially advanced support onboarding, what I would call roughly hugging. I totally agree. And I know Jason Limken from SASTR came out and he also has been talking about the demise of cs. But this is a podcast episode about sales in AE benchmarks.

Ray Reich
So I'm going to move on to compensation transfer sales, if that's okay. Dave. Well, I want to sneak one in on your a. I'm sorry, slide 17 real quick. This is the percent of people who have at least three roles, and so this cuts directly.

Dave Kellogg
And they're saying that as you get bigger, you're talking between 60% and 70 75% of people who have what these guys call triple specialization. That is SDR plus, AE plus AM and or CSM. So interesting. I wish they didn't have sdrs as part of this, to be honest. I wish it was just triple specialization amongst AEM and CSM, which is what we're looking at.

But anyway, I'll be happy to skip over to comp like you wanted to here. And I think we're going to slide 39 for those following along. We are going to go. So account executive on target earnings, also known as Otis, the last two years was supposed to be about growth, efficiency and getting profitable, right? Dave?

Ray Reich
The OTE at median for this population went from 167,000 on target earnings to 190k. That's a 14% increase over this two years. And VC, you know, typically OTE is around 50 50, 50% base salary, 50% commissions. This one had very close to that. 47% was commissions and 53% at median was base salary.

But I was shocked the OT went up that much over the last two years. Yeah, certainly not good for the CAC ratio. The even more interesting point, I'm not sure over exactly what timeframe. I think it's a decade long timeframe. Quotas increase every year at 2% and OT's increase every year at 5%, which is clearly a trend line that is not beneficial to customer acquisition cost.

Dave Kellogg
So that's pretty funny. But yeah, I'm not surprised at the OT level. I'm not surprised at the split. 50 50 is my rule of thumb. I'm kind of surprised it's not everybody at 50 50, to be honest.

But that's compensation. It's going up. You'd think in a looser labor market, that trend may not continue. Labor market's been pretty tight. Let's skip over now to slide 45 ray, and talk about commissions.

Ray Reich
Well, ot's go up. So it's like, was it base salary? Was it variable comp commissions? So in 2024, when this survey was conducted, the commission rate at median was 11.5%. Now that's up from 10.3% in 2022.

So you might say, well, 11.5, -10.3 that's only up 1.2%. But if you do it on a whole number basis, that's a 15% increase in the commission rate over the last two years. And then if you zoom out and go back to 2012, the median commission rate was 8.5%. And it just seems. Why is our CAC ratio keep going up?

It's because we keep paying salespeople more and more. And I think it might also be because marketing is getting harder and harder as you pick the low hanging fruit. But certainly, yeah, commission rates are going up. And kind of funny as we'll get to at the end attainment is kind of, I think, going down. So turns out you can't just raise quota and get more sales.

Dave Kellogg
We'll come back to that in a minute. I do want to hit one. You skip ray, which I think is important, which is the old one of. I know both of our favorite metrics, the old quota to Ote ratio. And to me, this is a golden rule.

Four x is my rule of thumb. If pressed, I'll say, well, it should be between four and five. And here they show that 44% of companies are between four and six x, meaning that quotas are four times ote. So if the OTE is going to be 190, that is around 200. That means we're going to expect the median quota to be around 800, maybe 900.

If they go to 4.5 x. So. Cause the other thing you might see, Ray, is if the OT's are going up and this ratio is being held constant, then quotas should go up. And the only real question is, does attainment also go up and does productivity also go up? Yeah, I think within the median.

Ray Reich
I don't. I'm not looking at this slide. I'm doing this off memory. I think the median was 4.2 in this report. Is that correct, Dave?

Dave Kellogg
Good memory, Ray. Yeah, absolutely. 4.2 is median. Okay, so let's go. So now we've seen compensation rise, right?

Ray Reich
And my brother, over your CAC says marketing is not being as efficient. And that's one of the reasons. But so we have. Okay, if we went up in comp by 14%, where did quotas go? Quotas at median went from 740 to 800.

That's only an 8% increase. And I'm like, just basic math, just two variables. If your compensation is going up by 14 and your quota is only going up by eight, you probably have a higher sales CAC ratio. Right? So all the data shows CAC ratios going up, and in particular, CAC payback period.

Dave Kellogg
I can't remember whose chart it was, but there's one we looked at the other week where it. Where somebody, you know, the average CAC payback has gone up to, I don't know, from 18 to 22 or something in that range. So CAC payback periods are definitely going up, but I think that's a result of these kind of underlying drivers. The other thing I'd say about marketing productivity, by the way, Ray, just to be a little more precise for my marketing brethren, the number one complaint I hear from marketers is paid channels are getting unsustainably expensive. And that's the actual problem, is I have people coming to me saying paid doesn't make sense anymore.

I can't scale paid anymore because it's already expensive, it's getting more expensive, etcetera, is paribus. And if you want me to even go even more beyond my plan, then it gets kind of hockey stick level even more expensive. So hearing a lot of pain in the marketing teams about that makes total sense. Here we are. We're at 20 minutes.

Ray Reich
We've only got two charts left to cover. So we'll cover them quickly. But you mentioned it earlier, quota attainment. So we raised quotas, but at the same time, quota attainment went from 66% in early 2022. So that was really more.

Looking at 2021 actuals, it went down to 51%. So we're raising ote, we're raising quotas, and quota achievement goes down that much. Dave, it's like no wonder we're having an issue in the industry. Yeah, I think you get pushing on a string. I mean, you can raise the quota, but you actually want to change as the productivity.

Dave Kellogg
And if you raise the quota and hold the productivity constant, this is exactly what you see, which is attainment goes down. I wish they actually did productivity explicitly here of just how much do people sell per year? I could probably guess it from or calculate it from some of the other numbers. But to me, whenever you're looking at this kind of data, I want to look at quota and I want to look at productivity. The difference being quota is what we assign them.

Productivity is what they actually sell. And then the last thing that we're going to talk about, you talked about how hard it is, especially with paid to create more qualified pipeline. We all know that pipeline has been a bear the last two years. At the same time, win rates, win rates are down at meeting across the board by 4% from 23% in the 2022 report. That is fy 21% to 19%.

Ray Reich
And both low end, so less than five k and higher end. Fifty k to one hundred k. Both solve. 4% decreases. So it's getting harder to generate pipeline.

It's getting more expensive to try to close pipeline. And we're closing last of a day. Yeah. The one thing, Ray, this is going to be a topic for a future episode, I think, but is the opposite of win rate equal to required coverage? I think in many cases it is not that they're making an analytical error here because they're basically saying, hey, if you invert these win rates, then you used to need 4.3 x coverage and now you need 5.3 x coverage.

Dave Kellogg
And I think that's probably a topic for another day. But let me just say the core issue I'm addressing here, Ray, is timing that I think the time period for win rates are measured differently than the time period for pipeline coverage, and we can cover that more in detail in a future episode. You're exactly right. And by the way, win rate is not a single point in time calculation. It changes over time as cell cycles elongate.

Ray Reich
You're going to see a lower win rate in the fourth part of a sales cycle versus in the third part of a sales cycle. Okay, Ray, sounds like the cops are coming for you again. Okay, well, you know how it is here in Schenectady. We have a lot of police action so Dave, thank you for talking about sales benchmarks with me and getting quite a few marketing insights into that. Thanks Ray, been a lot of fun.

Thanks everyone.

C
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Ray Grothreich is based in New York City and available on Twitter x rayreich. Dave Kakalog is based in Silicon Valley and available at kelblog. Schedecti, which is French for unspellable, is not our actual production location. You can reach us@sastalkpodcastmail.com thanks for listening.