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  • Writer's pictureJay Green

Deadly Cost Of Mis-hiring Early AEs

Updated: Feb 6

The hiring of early account executives (AEs) on a SaaS sales team carries significant weight.


Statistics show that 40% of all AEs result in a mis-hire. While these mis-hires can slow down and frustrate any sales team regardless of size and stage, they can be devastating at early-stage startups with less than 5 salespeople.


Mis-hiring at this stage of a startups' journey can delay finding 'product market fit', reduce the financial runway due to lack of ARR growth & increased cash burn, along with potentially causing current and potential investors to lose faith in the business or turn down an opportunity to fund the business in their next raise.



Table of Contents:


 

Mindset overview


When a startup is gearing up to hire their first AE, it likely means their founders have created early traction by bringing on new customers and are now looking to pour gas on the fire to accelerate growth. If everything goes according to plan, they'll parlay the success from this AE and hire additional salespeople, csm's/account managers, and marketers in the coming months when they believe they have a process that is replicatable by others.


But as we know...mis-hires happen often (especially for the first sales hire) because there is no blueprint for them to follow and they need to have the right personality/mindset/attitude to stick with it through the challenging eraly months while they start to gain traction.


Compensation overview


The average founding AE likely has somewhere between 5-10 years of closing experience, and for a product that sells in the mid-market range ($10k-$100k ARR), they would likely earn something like a $125,000 salary and a $125,000 commission for a total of $250,000 OTE.


For a comepnsation package of that size, their company likely expects them to close at least $840,000 in ARR per year (3.3x their expected OTE). Assuming a 4-month ramp without any revenue goals, their year 1 expected revenue would be around $540,000 ARR, or, $70,000 of ARR per month.


Chain reaction when things don't go as planned


When their future growth plans intricately intertwine with the performance of this salesperson, what happens if they have a poor start and only close about 20% of their revenue targets?


20% would be about $55,000 in ARR by month 8 vs the expected $280,000 in ARR. At this point, they've paid the employee $83,000 in salary (plus benefits) and have only received $55,000 in revenue without a likely clear indication that this salesperson will be able to turn things around.


At this point, they have a few options:

  1. Continue with the salesperson and hope they can dramatically increase performance

  2. Decide to move on from the salesperson and restart their search


Both scenarios have the potential to continue setting the company back which would put increased pressure on the salesperson and founders.


If they ultimately choose to move on from the salesperson, by the time they hire a new salesperson (estimated 60-90 days), they'll be in a 1-year hole compared to where they hoped to be 12-months earlier.


Ouch.


Difference betewen a mis-hire and a top performer


Here is a chart that shows the difference between a top performer who meets & exceeds their revenue targets and a poor performer who dramatically misses their goals month-over-month.



The gap between the two at 8-months of tenure is $300,000 in ARR which, for an early-stage SaaS startup, is the difference between gaining confidence that they're on the right track and second-guessing their decisions.


With the top-performing AE on their team, they're likely at the point of starting to scale their team, and with the poor-performer, they're treading water or putting a lot of undue pressure on the founders to spend more time selling themselves than they'd likely want to.


How to ensure you hire the right early AE (and help them achieve their potential)


Three quick tips to get you started:


  1. Prioritize industry experience

  2. Engage a GTM advisor throughout the interview process - someone who has scaled startups in the past and can help you spot the right personality/mindset

  3. Set up your early AEs with mentors (either your GTM advisor or salespeople you know who have been early AEs at SaaS companies)

  4. Partner with a company like ClosedWon Talent who specialize in helping early-stage SaaS companies hire revenue talent, including, found and early AEs


For a more detailed explanation of 7 tips to hire your founding AE, check out this blog post.


 

About ClosedWon Talent


We help startups build revenue teams for long-term success by avoiding mis-hires on core functions to maintaining growth rates, preserve cash, and ensure strong employee morale.


We're not traditional recruiters. Led by a founding team with a blend of GTM leadership at bootstrapped, Seed, and Series A startups along with deep expertise in GTM recruiting by supporting 150+ funded startups since 2019.


We'll help you build your team like we'd build our own. To learn more about how we might be able to help your startup grow, choose a time convenient for you here.

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