Disconnect headcount growth from business growth
Expenses don’t make a business, revenue and customers make a business
Welcome to Issue 9 of Cyber Building Blocks. Each week, I share one newsletter focused on helping you build a Go To Market engine for your cybersecurity startup.
Not what used to work 20 years ago, but what’s working today. Remember, I’m building side by side with you!
It doesn’t really matter if you have raised VC or not, after you start a business it’s common to push to grow grow grow! There isn’t anything necessarily wrong with that but many go about it the wrong way!
You need to be conscious of expenses specifically before you have revenue! Taking on a “bootstrapping” mindset even if you are planning to raise venture capital is a fiscally responsible thing to do! But where most founders and early leaders go wrong is they calculate revenue based on headcount. Which is very 2016, not 2026.
Imagine this: You have a goal to do $3M in new ARR in 2026 so you hire 4 AE’s and give them each a $1M quota and boom you have your plan and quota coverage. (Yes I’m assuming you already took into consideration ramping time and everything else which is a massive assumption!)
If your target is $30M just add an extra 0 and the point stays the name. It was the habit to directly attach headcount to revenue growth. The only thing this guarantees is that you’ll have a pretty high monthly burn, it doesn’t tell me anything about how much revenue you will do in the year.
In the past you’d interview sales leaders by “How big is your current team?” as a way of knowing how big of a revenue scale they had managed.
This led to very bloated teams, very poor average quota attainment, and very inefficient growth for many startups, specifically in cyber!
I think that is the wrong way to go about it for 2 different reasons.
First, If you don’t have the equivalent GTM engine built around those AEs and you expect them to go outbound and generate 100% of their own pipeline from scratch or best case with the support of a brand new SDR… Good luck…
Your bottleneck isn’t AE capacity, it’s your ability to generate pipeline or win POCs or one of a hundred other things potentially.
Look at your current AE’s calendars (Or your calendar if you are a founder and still taking the sales calls) and if it’s not packed to a point where they can’t handle more first meetings then adding more headcount won’t have any impact on your revenue growth!
That would add expenses, but not add revenue! Remember, revenue and customers make a business, not expenses.
The second way this can go wrong is it assumes that even with the new AI tools and capabilities you still are only able to hit the standard 3-5x OTE:quota ratio for an AE.
If you can layer AI throughout all of the various GTM teams and you have true product market fit (That is a big part!) you should start to see the ARR/salesperson increase.
The marketing output and strategy can be influenced by AI. The number of campaigns and A/B tests can increase. The speed at which you can create social and blog content all should be more efficient. This should drive more inbound pipeline.
The operations and administrative drag on AE’s time should decrease dramatically allowing them to spend more time talking to prospects and customers. This means that while maybe in 2015 they could only handle 10 new first meetings per week, maybe now they can handle 15 or 20 (Just hypothetical numbers, every business and sales process will be different!).
Solutions engineering used to have to put together slides and business justification collateral during the POC process that can now be done at a fraction of the cost allowing them to handle more POCs, etc.
I think you get my point. I think we are in the early innings of allowing companies to scale revenue without directly scaling sales headcount.
Yes there will be a minimum number to handle capacity or in person support but I think that can grow at a slower rate but still keep revenue growth high assuming the rest of the business is operating at a very AI first GTM.
PS - This does not just mean having a $20/mo ChatGPT Enterprise or Claude license for your GTM teams and sending a company wide email saying “we are an AI first company” haha sorry…
My advice? Only add headcount when that is your current bottleneck. If you need more people to handle your demand from the market, 100% you should hire. But understand your data before you increase the company burn and more importantly you burn out sales people while they make no money and scramble for any possible lead.
Hurts your team’s culture, and the CISO community can feel the desperation as well. Trust me.
Here’s what I’m trying this week: Remember I’m in the trenches building just like you
I’m not going to pretend like I’m an expert and have all of the answers on exactly which tools and exactly how to set up a perfectly AI integrated GTM engine. I’m still experimenting just like you. One thing I can say for sure, I am seeing the early signs of it working, and I do know that even in security we will be able to grow more efficiently than we have in previous years.
One thing I’m doing is I’m no longer looking at the number of employees to judge the success of a company. Revenue and customers are the signs I’m looking for!
Remember, revenue and customers make a business, not expenses.
That’s all for this week’s newsletter,
Keep fighting the good fight!
Konnor
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