A sales capacity model turns a top-down ARR target into the account executives who must already be in seat. Ramp time and attainment decide whether the plan is possible.
Work back from the new-logo ARR the plan needs to the ramped rep capacity that books it: quota times attainment, after ramp time and attrition. An illustrative SaaS company at 40 of ARR planning 60 per cent growth needs 22.0 of new-logo ARR; its 18 account executives will book 12.5 of it. To close the gap it must hire about 23 reps in January, not the 4 that quota arithmetic suggests, and if the hires come evenly through the year, no realistic number is enough.
Worked in full in The Growth Equity Investor by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
The sales capacity model is one of the first things a growth equity investor rebuilds in diligence, because it turns a top-down growth plan into a headcount plan that either exists or does not. A plan that needs reps who have not been hired yet is a plan for the year after next.
| Input | Value |
|---|---|
| Starting ARR | 40 |
| Net new ARR in the plan (60% growth) | 24 |
| Expansion from existing customers, share of starting ARR | 15% |
| Gross churn and contraction, share of starting ARR | 10% |
| Account executives today, fully ramped | 18 |
| Annual quota per account executive | 1.0 |
| Average attainment | 75% |
| Ramp: months at zero, then months at half productivity | 3, then 3 |
| Annual rep attrition, leavers replaced at once | 25% |
New-logo ARR = net new ARR + churn − expansion = 24 + 4.0 − 6.0 = 22.0
Expansion is usually carried by account managers or customer success, not by new-business reps, so it comes out of the target. Churn has to be replaced before anything counts as growth, so it goes in.
Productive capacity = quota × attainment = 1.0 × 75% = 0.75 per fully ramped rep-year
The plan therefore needs 22.0 ÷ 0.75 = 29.3 ramped rep-years of selling. In Excel, with new-logo ARR in B2, quota in B3 and attainment in B4: =B2/(B3*B4).
Eighteen ramped reps at 0.75 would book 13.5 if nobody left. At 25 per cent attrition, 2.37 per cent a month, about 4.5 leave during the year. Each is replaced at once, but the replacement books nothing for three months and half for three more. The existing team, run month by month, delivers 12.5.
Gap = 22.0 − 12.5; each rep hired in January books 0.424 this year
Solving month by month, with attrition applied to the new hires as well, the plan needs 22.5 reps hired on the first day of the year: 23 in practice, more than doubling the team. A rep hired at a random point in the year books on average 0.156, so spreading the hiring evenly would take 61.0 hires, which no recruiting team delivers.
| Hiring plan | Hires | New-logo ARR booked | Gap to 22.0 |
|---|---|---|---|
| No hires, replacements only | 0 | 12.5 | 9.5 |
| Quota arithmetic: 22 reps at 1.0 | 4 | 14.2 | 7.8 |
| Capacity model, all in January | 23 | 22.0 | 0.0 |
| Change | Existing team books | January hires needed |
|---|---|---|
| Base case | 12.5 | 22.5 |
| Attainment 65% | 10.8 | 30.5 |
| Attainment 85% | 14.1 | 16.4 |
| Ramp 1 month at zero, 2 at half | 13.0 | 15.1 |
| Ramp 4 months at zero, 5 at half | 12.2 | 32.3 |
| Attrition 15% | 12.9 | 20.5 |
| Attrition 35% | 12.0 | 24.8 |
Ramp time and attainment move the answer most. Enterprise sales cycles that stretch the ramp to nine months make the plan need 32.3 January hires; a transactional motion with a three-month ramp needs 15.1. Attrition matters less to the existing team than to the new cohort, because every leaver restarts the ramp clock.
The capacity model tests whether the plan is possible, not whether the market will buy. A company that hires the 23 reps still needs the pipeline to feed them: at 75 per cent attainment, each rep needs enough qualified pipeline to close 0.75 a year, and a pipeline coverage check belongs alongside this one.
Investors should also ask which reps the existing 18 really are. A team described as 18 account executives often includes reps hired last quarter who are still ramping, and a manager or two carrying a reduced quota. Rebuild the starting capacity from hire dates, not from the headcount on the organisation chart.
Dividing the target by full quota. 22.0 of new-logo ARR at 1.0 a rep says 22 reps, so 4 hires. That ignores attainment, which removes a quarter of every rep's quota, and ramp, which means even a rep hired in January books 0.424 in the first year, not 0.75. The 4-hire plan books 14.2 and misses by 7.8, a third of the target. The second mistake is using the full plan's 24 of net new ARR as the reps' target, forgetting that expansion and churn sit with other teams. The next step in diligence is what all this selling costs: CAC payback and the magic number turn the headcount into efficiency.
This year's bookings were largely decided by last year's hiring. Here, 60 per cent growth needs 23 extra reps in seat on 1 January; if they are not, the plan is a forecast of next year. The Growth Equity Investor covers underwriting the unit economics behind a growth plan, and the free workbook and working documents for the book include the Chapter 7 metrics, reported against rebuilt.
Multiply ramped reps by quota and average attainment, and count new hires only for the months they are productive. In the illustrative case 18 ramped reps with a 1.0 quota at 75 per cent attainment would book 13.5 a year, but attrition and the ramp of replacements bring it to 12.5.
It depends on the sales cycle; the illustrative case uses three months at zero and three at half productivity. On that ramp a rep hired in January books 0.424 of new ARR in the year against 0.75 for a ramped rep, and a nine-month ramp raises the hires the plan needs from 22.5 to 32.3.
The company's own history, not full quota. The illustrative plan assumes 75 per cent: at 65 per cent it needs 30.5 January hires and at 85 per cent 16.4. Using full quota is the most common reason a capacity plan looks achievable when it is not.
This article is one calculation from The Growth Equity Investor. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
Get the book on Amazon →Free companion files
Also on Amazon UK · Amazon Germany · Amazon France · Amazon Canada
Reading guide: private equity and private markets → · All 1682 articles →
If this book helped, or didn’t, a few lines on Amazon are worth more than they look: they are what the next reader goes on. Write a review. The workbook stays free either way.